tag:theconversation.com,2011:/au/topics/free-trade-agreements-34911/articlesfree trade agreements – The Conversation2023-04-03T20:10:12Ztag:theconversation.com,2011:article/2031112023-04-03T20:10:12Z2023-04-03T20:10:12ZHow Clive Palmer is suing Australia for $300 billion with the help of an obscure legal clause (and Christian Porter)<p>Australian business figure Clive Palmer is suing the Australian government for almost <a href="https://www.abc.net.au/news/2023-03-30/clive-palmer-to-sue-australia-for-300b-over-iron-ore-project/102166246">A$300 billion</a> in an international tribunal, having lost a case against the Western Australian government he took <a href="https://theconversation.com/explainer-why-did-the-high-court-rule-against-clive-palmer-and-what-does-the-judgment-mean-169633">all the way to the High Court</a>.</p>
<p>The High Court is meant to be the ultimate arbiter of Australian legal disputes. But in 2019 while in conflict with the WA government Palmer moved ownership of his two main Australian firms <a href="https://www.donnarossdisputeresolution.com/wp-content/uploads/2021/07/Up-in-smoke-will-Clive-Palmers-S-ingapore-company-be-denied-standin-g-in-its-ISDS-arbitration-against-Australia-2021-64-ADR-54.pdf">offshore</a>, ultimately to a company he set up in Singapore, <a href="https://opencorporates.com/companies/au/632245599">Zeph Investments Pte Ltd</a>.</p>
<p>As a Singapore-based company, Zeph believes it is able to take action against the Australian government that Australian-based companies cannot, using an obscure provision of the <a href="https://aanzfta.asean.org/index.php?page=chapter-11-investment/">ASEAN-Australia New Zealand Free Trade Agreement</a>.</p>
<p>What makes him think it would work?</p>
<h2>Palmer lost in the High Court</h2>
<p>First, a quick look at what’s at stake. </p>
<p>In 2002, Palmer’s two companies entered into an agreement with the WA government to explore, mine and process iron ore in the Pilbara region, known as the <a href="https://mineralogy.com.au/projects/balmoral-south/">Balmoral South Iron Ore Project</a>.</p>
<p>The two sides fell out, and in 2020 Palmer sued the state for <a href="https://www.smh.com.au/national/what-are-the-disputes-involving-clive-palmer-and-the-wa-government-about-20200819-p55ndk.html">$27.8 billion</a>. In 2022 the WA government hurriedly passed <a href="https://www.legislation.wa.gov.au/legislation/prod/filestore.nsf/FileURL/mrdoc_43095.pdf/$FILE/Iron%20Ore%20Processing%20(Mineralogy%20Pty%20Ltd)%20Agreement%20Amendment%20Act%202020%20-%20%5B00-00-00%5D.pdf?OpenElement">legislation</a> that indemnified the state against any money it might be found to owe Palmer, meaning he would get nothing.</p>
<p>Palmer appealed to the High Court, and <a href="https://eresources.hcourt.gov.au/downloadPdf/2021/HCA/31">lost</a> in a unanimous judgement.</p>
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Read more:
<a href="https://theconversation.com/clive-palmer-versus-western-australia-he-could-survive-a-high-court-loss-if-his-company-is-found-to-be-foreign-145334">Clive Palmer versus (Western) Australia. He could survive a High Court loss if his company is found to be “foreign”</a>
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<p>In his new guise as director of a Singapore-based company, Palmer has upped the ante to <a href="https://globalarbitrationreview.com/article/mining-magnate-launches-us200-billion-treaty-claim-against-australia">US$200 billion</a> (about A$300 billion) – an amount WA Premier Mark McGowan says is “A$11,500 for every person in Australia”. The demand includes US$10 billion for “moral damages”.</p>
<p>By way of comparison, A$300 billion is in the ballpark of the A$268 billion to $368 billion Australia is set to pay for nuclear submarines over three decades. </p>
<p>Palmer has hired former Australian Attorney-General <a href="https://www.theguardian.com/australia-news/2023/mar/30/clive-palmer-christian-porter-300bn-lawsuit-against-australian-government">Christian Porter</a> as part of his legal team. The clause Porter and the rest of the team will attempt to use is known as the Investor-State Dispute Settlement (<a href="https://www.dfat.gov.au/trade/investment/investor-state-dispute-settlement">ISDS</a>) clause. </p>
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<img alt="" src="https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Christian Porter, part of Clive Palmer’s legal team.</span>
<span class="attribution"><span class="source">Lukas Coch/AAP</span></span>
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<p>Investor-State Dispute Settlement clauses allow foreign (but not local) investors to claim damages from governments if they can argue that a change in law or a government decision has reduced their future profits.</p>
<h2>Trying again, as a Singaporean</h2>
<p>ISDS clauses were originally designed in the <a href="https://www.cato.org/commentary/isds-controversy-how-we-got-here-where-next">postcolonial period</a> to compensate foreign investors from countries which claimed to have the rule of law against having their assets appropriated by developing countries countries which were viewed as having less developed legal systems.</p>
<p>But its use has expanded to include concepts such as “indirect expropriation,” “minimum standard of treatment” and “<a href="https://www.iisd.org/toolkits/sustainability-toolkit-for-trade-negotiators/5-investment-provisions/5-4-safeguarding-policy-space/5-4-5-fair-and-equitable-treatment-fet-or-minimum-standard-of-treatment-mst/">legitimate expectations</a>” which enable foreign investors to sue on the grounds that government action reduced the value of their investments or did not meet their expectations at the time they invested.</p>
<p>US tobacco company <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Philip Morris</a> tried a similar ploy when it sued the Australian government over Australia’s plain packaging law. </p>
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Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>Although Philip Morris couldn’t sue using the Australia-US Free Trade Agreement (which lacks an ISDS provision), it moved ownership of its Australian arm to Hong Kong and sued using a Hong Kong treaty, ultimately <a href="https://nortonrosefulbright.com/en/knowledge/publications/ded9c356/philip-morris-asia-v-australia">failing</a>. However, Australia was left with a <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$24 million</a> legal bill, only half of which it recovered.</p>
<h2>The tool used by big tobacco</h2>
<p>Overseas, ISDS clauses have been used to enable corporations to take action against measures to reduce carbon emissions, as well as against public health measures. Denmark and New Zealand appear to have designed their fossil fuel phaseout plans specifically to <a href="https://theconversation.com/how-treaties-protecting-fossil-fuel-investors-could-jeopardize-global-efforts-to-save-the-climate-and-cost-countries-billions-182135">minimise their exposure to ISDS clauses</a>. </p>
<p>Unlike normal legal proceedings, ISDS adjudications lack safeguards including an independent judiciary (ISDS arbitrators can continue to act for clients in other ISDS cases) or the need to <a href="https://www.abc.net.au/radionational/programs/backgroundbriefing/isds-the-devil-in-the-trade-deal/6634538">consider precedents or allow appeals</a>. This means decisions lack consistency and the outcome of Palmer’s case is unpredictable.</p>
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Read more:
<a href="https://theconversation.com/corporations-prepare-to-sue-as-pandemic-reveals-trade-flaws-136604">Corporations prepare to sue as pandemic reveals trade flaws</a>
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<p>Mounting criticism of the clauses led to their exclusion from recent Australian trade agreements, including those with the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/aukfta/official-text">United Kingdom</a>, the <a href="https://www.dfat.gov.au/trade/agreements/negotiations/aeufta/australia-european-union-fta-fact-sheet">European Union</a> and <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">nations bordering the Pacific</a>.</p>
<p>Labor recently reaffirmed its<a href="https://www.trademinister.gov.au/minister/don-farrell/speech/trading-our-way-greater-prosperity-and-security"> policy</a> to exclude ISDS clauses from all new trade agreements and to review their inclusion in existing agreements. </p>
<p>Palmer’s case, and the millions of dollars and years of effort it could cost Australia even if he ultimately fails, makes removing these clauses more urgent.</p><img src="https://counter.theconversation.com/content/203111/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is an honorary research associate at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network, a network of community organisations which advocates for fair trade based on human rights, labour rights and environmental sustainability.</span></em></p>Palmer sued Western Australia’s government in the High Court and lost. But an obscure clause in a little-known trade agreement is giving him a second chancePatricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1899872022-09-19T13:18:10Z2022-09-19T13:18:10ZSouth Africa’s farm exports are an economic lifeline – with weak spots<figure><img src="https://images.theconversation.com/files/484013/original/file-20220912-14-ql33wg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Citrus, table grapes and a range of deciduous fruits dominate South Africa's agricultural exports</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>International trade has been at the core of South Africa’s <a href="https://academic.oup.com/edited-volume/37171/chapter-abstract/323739043?redirectedFrom=fulltext">agricultural progress</a> since the early 2000s. Since 1994, the country has excelled in opening up <a href="https://www.econ3x3.org/article/south-africas-trade-policy-failing-agricultural-sector">new markets, as evidenced by several free trade agreements</a> with critical regional and international markets.</p>
<p>The country exports <a href="https://www.dalrrd.gov.za/Portals/0/Statistics%20and%20Economic%20Analysis/Statistical%20Information/Abstract%202021.pdf">roughly half of its produce in value terms</a>. The top exportable products are high value and labour-intensive horticulture produce, a subsector that expanded significantly over the past two decades. Citrus, table grapes and a range of deciduous fruits dominate the export list.</p>
<p>This means international trade has become crucial for sustaining farm profitability and <a href="https://www.statssa.gov.za/publications/P0211/P02112ndQuarter2022.pdf">job creation in South African agriculture</a>.</p>
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<img alt="SA agriculture exports" src="https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=351&fit=crop&dpr=1 600w, https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=351&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=351&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=441&fit=crop&dpr=1 754w, https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=441&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/483978/original/file-20220912-26-iank1f.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=441&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">SA agriculture exports.</span>
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<p>Over the past decade, agriculture and agro-processing exports have averaged <a href="https://www.trademap.org/Product_SelCountry_TS.aspx?nvpm=1%7c710%7c%7c%7c%7c%7c75088%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1%7c1">11% of the country’s overall exports</a>, up from <a href="https://www.trademap.org/Product_SelCountry_TS.aspx?nvpm=1%7c710%7c%7c%7c%7c%7c75088%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1%7c1">9% in the decade before</a>. This shows South Africa’s success in opening export markets, and farmers’ ability to produce high quality products that meet global standards and needs. </p>
<p>Even though agriculture’s share of gross domestic product (GDP), a measure of economic output, has shrunk over the years, from just under 10% in the 1960s to around 2.5% now, the sector has grown in both <a href="https://www.dailymaverick.co.za/opinionista/2019-08-07-twenty-five-years-since-democracy-how-has-sas-agricultural-sector-performed/">output and value terms</a>. Trade has been the core of the sector’s growth. </p>
<p>Still, South Africa’s agricultural sector remains vulnerable on two fronts. It is too <a href="https://www.econ3x3.org/article/south-africas-trade-policy-failing-agricultural-sector">reliant on a few markets</a>. And there are <a href="https://wandilesihlobo.com/2022/08/29/challenges-that-keep-south-african-farming-community-up-at-night/">inefficiencies in the domestic logistics chains</a>. </p>
<p>It is against this background that talk about <a href="https://www.namc.co.za/aamp/#:%7E:text=The%20AAMP%20is%20one%20of,post%20the%20Covid%2D19%20pandemic%22%22">potential expansion of production</a> should be viewed. First there should be a greater effort to increase access to existing and new markets. There should also be a sharper focus on improving the efficiency of logistics to move produce domestically and to export markets.</p>
<p>Over the past few months, there have been several reports of <a href="https://theconversation.com/south-african-farming-new-policy-offers-promise-but-theres-fixing-to-be-done-too-175152">efficiency challenges in the domestic ports</a> and <a href="https://www.bloomberg.com/news/articles/2022-08-10/eu-s-new-rules-cost-south-african-citrus-exporters-12-million#xj4y7vzkg">market access constraints</a> in key export markets such as the EU. These could hinder long term growth of the sector, as new land comes into production to expand output. </p>
<h2>Recent challenges in key agriculture export markets</h2>
<p>An example of South Africa’s vulnerability to a lack of diversification was illustrated recently by two events. China temporarily banned imports of South African wool and the EU restricted <a href="https://theconversation.com/south-african-citrus-new-eu-rules-are-unjust-and-punitive-188387">citrus imports</a>.</p>
<p>This mattered because outside the African continent, South Africa’s agricultural exports are heavily concentrated in a few Asian countries and the EU. </p>
<p>Export diversification contributes to a country’s economic resilience, especially in the face of disruptions to global supply chains or if one of the major markets imposes non-tariff barriers to protect its producers from competition, as it is <a href="https://theconversation.com/south-african-citrus-new-eu-rules-are-unjust-and-punitive-188387">increasingly the case</a>. </p>
<p>Recent challenges regarding South Africa’s access to the wool market in China have <a href="https://wandilesihlobo.com/2022/09/04/co-operation-between-the-south-african-government-and-farmers-over-the-wool-ban-is-a-template-for-other-issues/">now been resolved</a>. But the losses from when the ban was in place are clear in the <a href="https://www.trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c">trade data</a>. Wool exports fell by <a href="https://www.trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c">42% in the second quarter of 2022</a> compared with the corresponding period in 2021.</p>
<p>For citrus, which continues to experience <a href="https://wandilesihlobo.com/2022/07/09/rising-protectionism-across-the-world-presents-threats-to-south-africas-agriculture/">protectionist tendencies</a> in the EU after changes in plant regulations, the impact could show more pointedly in the third quarter of the year. Still, a lot will depend on the engagements between the South African and EU authorities on the <a href="https://wandilesihlobo.com/2022/07/09/rising-protectionism-across-the-world-presents-threats-to-south-africas-agriculture/">new plant safety regulations</a>, which involve stringent new cold treatment requirements.</p>
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Read more:
<a href="https://theconversation.com/south-african-citrus-new-eu-rules-are-unjust-and-punitive-188387">South African citrus: new EU rules are unjust and punitive</a>
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<p>In the second quarter of this year, citrus was still the top exportable agricultural product by value in South Africa, although down by <a href="https://www.trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c">22% from the second quarter of 2021</a>. The loss of the Black Sea market since the start of the Ukraine war might have also contributed to the slowing of exports. Before the war, Russia accounted, on average, for <a href="https://theconversation.com/how-russia-ukraine-conflict-could-influence-africas-food-supplies-177843">7% of South Africa’s citrus exports in value terms</a>. It also accounted for <a href="https://theconversation.com/how-russia-ukraine-conflict-could-influence-africas-food-supplies-177843">12% of South Africa’s apples and pears exports</a>.</p>
<p>The other challenge is logistics. The state-owned tranport facility Transnet showed great agility in <a href="https://wandilesihlobo.com/2022/08/21/south-africas-agricultural-exports-to-slow-amid-barriers-to-wool-beef-and-citrus/">rebuilding the port of Durban after the destructive floods</a> in April this year.</p>
<p>Similar energy and focus are necessary to improve the ports and rail functioning. Another example is the road network that is in <a href="https://theconversation.com/small-towns-are-collapsing-across-south-africa-how-its-starting-to-affect-farming-162697">disrepair across numerous agricultural towns</a>. It could slow export activity if not properly improved.</p>
<h2>What’s driving growth</h2>
<p>In the second half of this year, South Africa’s agricultural exports rose by <a href="https://www.trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c">5% year on year, reaching US$3.4 billion</a>. The top exportable products were citrus, maize, apples, pears, wine, grapes, figs, dates, avocados, nuts, fruit juices, wheat, wool and sugar, among others. We expect some of these products to have continued to dominate the export list in the third quarter.</p>
<p>Underpinning this robust export value are the sizeable agricultural output in the 2021/22 production season and generally solid global demand, even at higher commodity prices for maize.</p>
<p>Maize, apples and pears, grapes, and sunflower oil saw a significant uptick from the first quarter of 2021, and thus overshadowed the decline in citrus exports during the period under review.</p>
<p>There are still ample agricultural and beverage exports, which should support the activity in the third and last quarter of the year.</p>
<p>The African continent remained South Africa’s largest agricultural exports market in the first quarter of this year, accounting for <a href="https://www.trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c">35% in value terms</a>. Asia was the second largest region (28%) and the EU held the third position with a 21% share.</p>
<p>The UK is one of the most important agricultural markets for South Africa and accounted for 7% of overall exports in the second quarter. The balance of 9% value constitutes the Americas and other regions of the world.</p>
<p>The country’s trade policy and activity are not one-directional. South Africa is also a significant importer of agricultural products. It relies on other countries for crucial food products such as wheat, rice, palm oil, sunflower oil and poultry.</p>
<h2>Policy direction</h2>
<p>South Africa’s agricultural sector is export-oriented. Thus, any improvements in production through various development plans, such as the <a href="https://www.namc.co.za/aamp/#:%7E:text=The%20AAMP%20is%20one%20of,post%20the%20Covid%2D19%20pandemic.">Agriculture and Agro-processing Master Plan</a>, should be anchored on expanding export markets.</p>
<p>Japan, China, India, Saudi Arabia, Bangladesh, the Philippines and South Korea are key markets in which South African <a href="https://wandilesihlobo.com/2022/08/29/challenges-that-keep-south-african-farming-community-up-at-night/">agribusinesses and farmers are interested in expanding their presence</a>. It’s also important to maintain a relationship with the existing key markets.</p>
<p>All this should happen while domestic efforts to improve the functioning of the network industries are under way. This will be the only realistic path to maintaining the growth of this sector and, with that, job creation and vibrancy of the rural towns.</p><img src="https://counter.theconversation.com/content/189987/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and a member of the Presidential Economic Advisory Council (PEAC).</span></em></p>South Africa’s agricultural exports are vulnerable because of reliance on a few markets and weaknesses in domestic logistics chains.Wandile Sihlobo, Senior Fellow, Department of Agricultural Economics, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1866372022-07-13T20:02:01Z2022-07-13T20:02:01ZA trade deal with the EU makes sense for NZ, but what’s in it for Europe? Symbolically, a lot<figure><img src="https://images.theconversation.com/files/473755/original/file-20220713-24-i1b7wc.jpg?ixlib=rb-1.1.0&rect=25%2C0%2C5569%2C3727&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">NZ PM Jacinda Ardern and EU Commission President Ursula von der Leyen after their meeting on June 30.</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>It’s easy to understand New Zealand’s motivation for securing a free trade agreement (FTA) with the European Union (EU). What’s less apparent is why the EU chose to pursue the agreement with a small and distant country, currently ranked its 50th most important trading partner.</p>
<p>By contrast, the EU is New Zealand’s fourth largest trading partner (after China, Australia and the US). And although the deal has been criticised by some in the <a href="https://www.rnz.co.nz/news/country/470141/meat-and-dairy-industries-very-disappointed-with-new-zealand-european-union-trade-deal">dairy and meat industries</a>, it is still expected to be worth an extra NZ$1.8 billion per annum to the New Zealand economy by 2035. </p>
<p>But the trade deal, announced in late June during Prime Minister Jacinda Ardern’s European visit (during which she also attended a NATO summit), has been hard won. </p>
<p>It went through 12 negotiation rounds in the face of various challenges and distractions for the EU: Brexit, <a href="https://www.ft.com/content/dd09b857-2d00-4ea3-ac86-0d15623fe3cd">EU opposition to New Zealand agricultural exports</a>, the <a href="https://theconversation.com/has-the-coronavirus-proved-a-crisis-too-far-for-europes-far-right-outsiders-142415">global pandemic</a> and the war in Ukraine. All of which suggests more than just economic motivations were at play for the 27 EU member states.</p>
<p>Digging deeper, then, we can see several significant strategic considerations for the European Union that demonstrate some of its current thinking, not only about the direction of its global trade policy but also its international ambitions.</p>
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<h2>The EU back on track</h2>
<p>Negotiations between the EU and New Zealand were formally launched in 2018 (alongside a yet-to-be concluded EU–Australia FTA). At the time, New Zealand was one of only a handful of countries that had neither concluded nor was negotiating a preferential trading relationship with the EU. </p>
<p>The EU <a href="https://www.europarl.europa.eu/legislative-train/theme-a-stronger-europe-in-the-world/file-eu-new-zealand-fta">fast-tracked</a> New Zealand and Australian negotiations as a counter to the perceived trade protectionism represented by Brexit and the Trump presidency in the US. </p>
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Read more:
<a href="https://theconversation.com/some-see-nzs-invite-to-the-nato-summit-as-a-reward-for-a-shift-in-foreign-policy-but-thats-far-from-accurate-185591">Some see NZ's invite to the NATO summit as a reward for a shift in foreign policy, but that's far from accurate</a>
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<p>With a population of five million and a GDP of just <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=NZ">US$250 billion</a>, New Zealand doesn’t represent much financially for the EU. Symbolically, however, it has wider significance.</p>
<p>The agreement <a href="https://www.businesseurope.eu/publications/eu-new-zealand-agreement-welcome-restart-ambitious-bilateral-trade-agenda">has been called</a> a “welcome and much-needed resumption of an ambitious EU trade agenda”. This had been hampered by member state resistance to ratifying the FTA with the South American regional trade bloc Mercosur, increased protectionism due to the pandemic, and EU trade sanctions against Russia. </p>
<h2>Climate change and security</h2>
<p>The EU has also <a href="https://ec.europa.eu/commission/presscorner/detail/en/IP_22_4158">hailed the agreement</a> as containing the “most ambitious sustainability commitments in a trade agreement ever”. The inclusion of mutually sanctionable commitments to the Paris Agreement, is part of strengthening the EU’s claim to be a world leader in climate change policy. </p>
<p>The EU already has some of the strongest climate policies in the world, with around 87% of its citizens <a href="https://ec.europa.eu/clima/citizens/citizen-support-climate-action_en">agreeing</a> “the EU should set ambitious targets to increase renewable energy and support energy efficiency”. </p>
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Read more:
<a href="https://theconversation.com/behind-the-inclusive-window-dressing-the-nz-uk-free-trade-deal-disappoints-politically-and-economically-178408">Behind the ‘inclusive’ window dressing, the NZ-UK free trade deal disappoints politically and economically</a>
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<p>Although the EU was a leading voice in the Paris Agreement, it is trickier to persuade non-member countries to follow its own high environmental standards. This FTA will set a new standard, not only for the EU but also the world.</p>
<h2>A voice in the Indo-Pacific</h2>
<p>Perhaps most importantly, though, closer cooperation with New Zealand can strengthen the EU’s place in the increasingly fraught Indo-Pacific, a region where it has <a href="https://www.eeas.europa.eu/sites/default/files/jointcommunication_2021_24_1_en.pdf">already named</a> New Zealand as one of its partners. </p>
<p>EU and New Zealand officials often play up their shared values of democracy, human rights and the rule of law. And the EU is an important stabiliser in the rules-based international system that remains so important for small states like New Zealand.</p>
<p>EU cooperation with like-minded countries in the Pacific is a key factor in its pursuit of recognition and legitimacy in a region that is increasing in geo-strategic importance. </p>
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Read more:
<a href="https://theconversation.com/german-election-the-race-to-replace-angela-merkel-and-why-it-matters-to-new-zealand-168379">German election: the race to replace Angela Merkel and why it matters to New Zealand</a>
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<p>The EU launched its Indo-Pacific strategy in 2021, following the example of Australia (2016) and the US (2017), and New Zealand’s own <a href="https://www.mfat.govt.nz/assets/OIA/R-R-The-Pacific-reset-The-First-Year.PDF">Pacific Reset</a> (2018). </p>
<p>And while New Zealand is a small country, it enjoys a broadly positive international image through its independent foreign policy, and is an important regional player. It is a member of the Pacific Islands Forum, and was the first country in the world to sign an FTA with China. </p>
<h2>Benefits beyond trade</h2>
<p>The establishment of the <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/05/fact-sheet-implementation-of-the-australia-united-kingdom-united-states-partnership-aukus/">AUKUS</a> pact in 2021 further elevated the significance of New Zealand’s importance as an Indo-Pacific partner to the EU, involving as it did the withdrawal of Australia from a contract to buy French submarines. </p>
<p>That deal had been viewed by France as the cornerstone of its own approach to the region. Its collapse has somewhat soured Australia’s relationship with one of the EU’s key players.</p>
<p>For all these reasons, then, the EU-NZ FTA can be viewed as a positive development that cements an economic relationship as well as emphasising common values, goals and benefits beyond purely monetary gains. </p>
<p>While potentially economically advantageous to New Zealand – and not without its critics – it can be understood as a signal of the EU’s intention to extend its global influence beyond trade, staking a claim as a political and security actor of real significance.</p><img src="https://counter.theconversation.com/content/186637/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Serena Kelly receives funding from the Erasmus+ Programme of the European Union. She is affiliated with the New Zealand Institute of International Affairs and the European Studies Association of Australia and New Zealand.</span></em></p><p class="fine-print"><em><span>Mathew Doidge receives funding from the Erasmus+ programme of the European Union. He is affiliated with the European Studies Association of Australia and New Zealand (ESAANZ).</span></em></p>For the EU, the recent trade deal with New Zealand is about a lot more than money. Climate change and expanding its role and influence well beyond European borders are major motivations.Serena Kelly, Senior Lecturer, National Centre for Research on Europe, University of CanterburyMathew Doidge, Senior Research Fellow, National Centre for Research on Europe, University of CanterburyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1784082022-03-04T01:48:35Z2022-03-04T01:48:35ZBehind the ‘inclusive’ window dressing, the NZ-UK free trade deal disappoints politically and economically<figure><img src="https://images.theconversation.com/files/449948/original/file-20220303-17-19tdou2.jpg?ixlib=rb-1.1.0&rect=15%2C0%2C3389%2C2220&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The free trade agreement (FTA) signed between <a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/new-zealand-united-kingdom-free-%20%20trade-agreement/resources/#bookmark0">New Zealand and the United Kingdom</a> this week demonstrates the intransigence of political leaders and their official advisers in the face of concerted demands to rethink the country’s trade policy paradigm. </p>
<p>Those demands reached a high point with the deeply unpopular Comprehensive and Progressive Agreement for Trans-Pacific Partnership (<a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/comprehensive-and-progressive-agreement-for-trans-pacific-partnership-cptpp/">CPTPP</a>), which was rescued from the even more unpopular Trans-Pacific Partnership Agreement (<a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/trans-pacific-partnership-agreement-tpp/">TPP</a>) after the US had quit. </p>
<p>Opposition to the TPP/CPTPP was part of an international backlash that saw a series of high-profile negotiations abandoned or seriously stalled.</p>
<p>These included the EU’s mega-deal with the US for the Trans-Atlantic Trade and Investment Partnership (<a href="https://ec.europa.eu/trade/policy/in-focus/ttip/">TTIP</a>), the Trade in Services Agreement (<a href="https://www.dfat.gov.au/trade/agreements/negotiations/tisa/trade-in-services-agreement">TiSA</a>) across 23 mainly rich parties, the Canada and EU Trade Agreement (CETA) and others.</p>
<p>As I wrote in <a href="https://www.bwb.co.nz/books/the-fire-economy/">The FIRE Economy</a> in 2015, this backlash was part of a broader rejection of neoliberal globalisation and the massive private power accumulated by global capital, especially finance capital. </p>
<p>The global financial crisis had brought a human face to structural wealth and income inequality in Anglo-American countries (as Thomas Piketty documented in his book <a href="https://www.theguardian.com/books/2014/jul/17/capital-twenty-first-century-thomas-piketty-review">Capital in the 21st Century</a>), and to its unequal gender and race impacts.</p>
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<img alt="" src="https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449941/original/file-20220303-8225-1eay3iz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Then-trade minister David Parker and Prime Minister Jacinda Ardern announce the start of free trade negotiations with the UK in 2020.</span>
<span class="attribution"><span class="source">GettyImages</span></span>
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<h2>‘Inclusive trade’</h2>
<p>Free trade agreements were powerful vehicles to advance and lock in that failed model. Multinationals could even sue host governments offshore through investor-state dispute settlement (<a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/comprehensive-and-progressive-agreement-for-trans-pacific-partnership-cptpp/understanding-cptpp/investment-and-isds/">ISDS</a>) arbitration for moves that undermined their value or profits. </p>
<p>Equally, the secrecy under which trade pacts were negotiated, and the fetters they put on future governments’ policy options, were an affront to democracy and self-determination.</p>
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Read more:
<a href="https://theconversation.com/new-zealand-is-overdue-for-an-open-and-honest-debate-about-21st-century-trade-relations-160922">New Zealand is overdue for an open and honest debate about 21st-century trade relations</a>
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<p>So Labour faced a quandary when it formed a government in October 2017. Having voted against the ratification of the TPPA, it scrambled to justify its U-turn to support the CPTPP as “progressive”. </p>
<p>In April 2018, the then trade minister, David Parker, announced “<a href="https://www.beehive.govt.nz/release/modernising-our-trade-policy-trade-all-have-your-say">Trade for All</a>”, a slogan <a href="https://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf">borrowed from the EU</a>, to develop a “progressive and inclusive” trade agenda. A year later he appointed the <a href="https://www.mfat.govt.nz/assets/Trade-General/Trade-policy/Trade-for-All-report.pdf">Trade for All Advisory Board</a>, which delivered its moderate report and recommendations in November 2019. </p>
<p>The government took another seven months to <a href="https://www.mfat.govt.nz/en/media-and-resources/proactive-release-trade-for-all-advisory-board-recommendations-report-on-progress/">respond</a>. Meanwhile, New Zealand continued pursuing its usual agenda through the 16-country Regional Comprehensive Economic Partnership, in the World Trade Organisation, in negotiations with the EU – and in informal pre-Brexit talks with the UK. </p>
<p>The one significant change was Labour’s decision not to include ISDS provisions in future agreements. </p>
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<h2>Trade and the Treaty</h2>
<p>Predictably, the government adopted the advisory board’s “soft” recommendations that could be accommodated within the existing trade policy paradigm, including new chapters on “inclusive trade”.</p>
<p>But the government rejected recommendations that could make a substantive difference. These included a moratorium on new commitments pending a comprehensive review of digital trade policy, and reviewing the widely criticised Te Tiriti o Waitangi/Treaty of Waitangi exception that allows “more favourable treatment” to Māori, subject to various conditions, but does not protect treaty compliance measures more generally. </p>
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Read more:
<a href="https://theconversation.com/the-uk-wants-to-join-a-pacific-trade-deal-why-that-might-not-be-a-risk-worth-taking-162900">The UK wants to join a Pacific trade deal – why that might not be a risk worth taking</a>
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<p>Also rejected was a proposal that the “national interest analysis”, which accompanies any FTA text to parliament, be prepared independently rather than by the trade ministry that negotiated it.</p>
<p>Since then, the pandemic has fuelled calls to waive intellectual property rules in trade agreements that guarantee Big Pharma’s patents over medical supplies. The UK and EU oppose the waiver. </p>
<p>In December 2021 the Waitangi Tribunal found the CPTPP’s electronic commerce chapter, especially its rules on offshoring of data, which are now standard in many FTAs, breached the Crown’s Treaty of Waitangi <a href="https://waitangitribunal.govt.nz/news/tribunal-releases-report-on-electronic-commerce-chapter-in-cptpp/">obligations</a>.</p>
<h2>‘Clip-on’ agreements</h2>
<p>That context explains what we see in the new UK FTA. Of its 33 chapters, two-thirds could be largely cut and pasted from the TPPA. </p>
<p>Those chapters constrain the future policy and regulatory options available to governments on (among other things) import tariffs, food labelling and standards, intellectual property rights, investment, financial services, state-owned enterprises and government procurement. </p>
<p>Many remaining chapters on trade and gender, Māori, development, and small and medium enterprises are clustered under an “inclusive trade sub-committee”. While these are new to New Zealand’s agreements, they mirror the “inclusive trade” agenda designed by the EU, Canada and others to defuse the backlash against these deals. </p>
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Read more:
<a href="https://theconversation.com/old-wine-in-new-bottles-why-the-nz-uk-free-trade-agreement-fails-to-confront-the-challenges-of-a-post-covid-world-170621">Old wine in new bottles – why the NZ-UK free trade agreement fails to confront the challenges of a post-COVID world</a>
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<p>I describe these chapters as “clip-ons”. None is enforceable. Most promise to co-operate on sharing “best practice”, ensuring access to information, promoting exchanges and facilitating opportunities to take advantage of an agreement that works for big business more than ordinary consumers. </p>
<p>The preamble and the Māori trade chapter “note” the UK was the original signatory to Te Tiriti o Waitangi, but eschew any ongoing obligations. The UK rejects any inference that it recognises Māori genetic resources and traditional knowledge as forms of intellectual property, or that these affect the UK’s laws. </p>
<p>A footnote records that the UK has no legal or financial obligation to explore or undertake any of the proposed co-operation activities. </p>
<p>The labour and environment chapters reiterate existing international obligations. Each country promises to comply with its domestic laws and try not to dilute them to get a trade or investment advantage, and to promote voluntary corporate social responsibility. These chapters are enforceable through a tailored dispute process.</p>
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<h2>Did NZ try for a better deal?</h2>
<p>Maybe New Zealand’s negotiators sought to do more that was genuinely progressive, but the secrecy surrounding the negotiations means we will never know. </p>
<p>The government must be judged on the deal it agreed to – which fails to confront the need for more fundamental reform, compounded by allowing a mere ten days for submissions on the 1,700-page text.</p>
<p>And for what? There are the usual grand headlines that the FTA is worth NZ$1 billion to exporters with a <a href="https://www.1news.co.nz/2022/03/01/nz-and-uk-free-trade-deal-signed-worth-up-to-1-billion/">50% increase in exports</a> to the UK. </p>
<p>But the government’s own <a href="https://www.mfat.govt.nz/assets/Trade-agreements/UK-NZ-FTA/NZ-UK-FTA-National-Interest-Analysis.pdf">economic modelling</a> projects a mere 0.3% increase on current GDP when the agreement comes into force fully – a rate of 0.02% per year over 15 years. Hardly a bonanza.</p><img src="https://counter.theconversation.com/content/178408/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane Kelsey is a pro bono technical adviser for the Ngā Toki Whakarururanga on trade policy and negotiations.</span></em></p>Government modelling projects a mere 0.3% increase on current GDP when the NZ-UK free trade agreement comes into full force. Does that justify the concessions the deal makes?Jane Kelsey, Professor of Law, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1661542021-08-17T02:27:56Z2021-08-17T02:27:56ZAustralia is at risk of taking the wrong tack at the Glasgow climate talks, and slamming China is only part of it<figure><img src="https://images.theconversation.com/files/416430/original/file-20210817-23-gquyx3.jpg?ixlib=rb-1.1.0&rect=459%2C365%2C2570%2C1427&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> </figcaption></figure><p>Buried within the prime minister’s response to the latest report from the <a href="https://theconversation.com/this-is-the-most-sobering-report-card-yet-on-climate-change-and-earths-future-heres-what-you-need-to-know-165395">Intergovernmental Panel on Climate Change</a> is just about everything we’re at risk of getting wrong at the Glasgow <a href="https://ukcop26.org/">climate talks</a> in October.</p>
<p>After slamming China — whose emissions per person are <a href="https://data.worldbank.org/indicator/EN.ATM.CO2E.PC?locations=AU-CN&name_desc=false">half</a> of Australia’s — for not doing more to cut emissions, Scott Morrison said the Glasgow talks were the “biggest multilateral global negotiation the world has ever known”.</p>
<p>If he treats the talks as just another (big) negotiation, we’re in trouble.</p>
<p>The way the Department of Foreign Affairs and Trade usually treats negotiations is hold something back, hold out the prospect of “giving it up,” and then only make the concession if the other side gives something in return. Even if holding back damages Australia.</p>
<p>Cars are a case in point. From an economic point of view, there is no reason whatsoever to continue to impose tariffs (special taxes) on the import of cars — none, not even in the eyes of those who support the use of tariffs to protect Australian jobs. Australia no longer makes cars.</p>
<p>Yet the tariff remains, at 5%, making it perhaps <a href="https://www.afr.com/politics/federal/time-to-scrap-1b-in-ridiculous-car-taxes-20200218-p541ua">A$1 billion</a> harder than it should be for Australians to buy new cars (although nowhere near as hard as it was in the days when the tariff was 57.5%).</p>
<p>The tariff seems to be in place largely to give the Department of Foreign Affairs and Trade something to negotiate away in trade agreements: for use as what the Productivity Commission calls “<a href="https://www.pc.gov.au/research/ongoing/trade-assistance/2013-14/trade-assistance-review-2013-14.pdf">negotiating coin</a>”.</p>
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<a href="https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1217&fit=crop&dpr=1 754w, https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1217&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/416417/original/file-20210817-25-19qyof2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1217&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Australia removed tariffs on cars from Korea but kept them in place more broadly.</span>
<span class="attribution"><span class="source">Tricky_Shark/Shutterstock</span></span>
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<p>Here’s how it worked in the 2014 <a href="https://www.dfat.gov.au/trade/agreements/in-force/kafta/fact-sheets/Pages/kafta-outcomes-at-a-glance">Australia-Korea Free Trade Agreement</a>. Australia agreed to remove the remaining 5% tariff on Korean cars, “with consumers and businesses to benefit from downward pressure on import prices”.</p>
<p>But Australia didn’t remove the tariff on car imports altogether, which would have given us a much bigger benefit but denied the department negotiating coin.</p>
<p>The next year the department did it again, agreeing to give up the tariff on imported Japanese cars in the <a href="https://www.dfat.gov.au/trade/agreements/in-force/jaepa/fact-sheets/Pages/jaepa-fact-sheet-outcomes-at-a-glance">Japan-Australia Economic Partnership Agreement</a> (but not on other cars) so Australians could “benefit from lower prices and/or greater availability of Japanese products”.</p>
<p>Two years later, it did it again, with cars from <a href="https://www.dfat.gov.au/trade/agreements/in-force/chafta/fact-sheets/Pages/chafta-outcomes-at-a-glance">China</a>.</p>
<p>When the UK and European agreements are negotiated, it’ll do it there too.</p>
<h2>Australia holds back reforms</h2>
<p>Eventually Australians will get what they are entitled to. But the point is that rather than advancing the cause of free trade, the department has held back, treating a win for the other side as a loss for us, when it wasn’t.</p>
<p>The Centre for International Economics believes the much bigger earlier set of tariff cuts lifted the living standard of the average Australian family by <a href="https://www.dfat.gov.au/about-us/publications/trade-investment/Pages/cie-report-on-australian-trade-liberalisation">A$8,448</a>.</p>
<p>Had our trade negotiators been in charge, we would still be waiting. Instead the Hawke and then the Keating governments pushed through unilateral reductions, asking for nothing in return.</p>
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Read more:
<a href="https://theconversation.com/this-is-the-most-sobering-report-card-yet-on-climate-change-and-earths-future-heres-what-you-need-to-know-165395">This is the most sobering report card yet on climate change and Earth's future. Here’s what you need to know</a>
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<p>As former Trade Minister <a href="https://australianpolitics.com/2010/12/10/future-of-trade-policy-emerson-speech.html">Craig Emerson</a> put it, this gave Australia “credibility in international trade negotiations way beyond the relative size of our economy”. </p>
<p>Does that sound like the sort of thing Australia might need at Glasgow, to have enough credibility to urge even bigger emitters to deliver the kind of cuts on which our futures and future temperatures depend?</p>
<h2>It won’t work with China</h2>
<p>The prime minister is right to say that China is the world’s biggest greenhouse gas emitter, even though its emissions per person are low. Its high population means it accounts for <a href="https://www.ucsusa.org/resources/each-countrys-share-co2-emissions">28%</a> of all the greenhouse gases pumped out each year. The next biggest emitter, the United States, accounts for 15%</p>
<p>But China’s status is new. Until 2006 it pumped out <a href="https://ourworldindata.org/co2-emissions">less</a> per year than the United States. Because the US has had mega-factories and heating and so on for so much longer, it is responsible for by far the biggest chunk of the greenhouse gasses already in the atmosphere: <a href="https://ourworldindata.org/contributed-most-global-co2">25%</a>, followed by the European Union with 22%.</p>
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<a href="https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=500&fit=crop&dpr=1 600w, https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=500&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=500&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=629&fit=crop&dpr=1 754w, https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=629&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/416422/original/file-20210817-13-1tmnqwl.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=629&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>China might reasonably feel that countries like the US that have done the most to create the problem should do the most to fix it. </p>
<p>Like Australia, the US pumps out twice as much per person as China and has much more room to cut back.</p>
<p>On the bright side, China knows that being big means it is in a position to make a difference to global emissions in a way that other countries cannot on their own. And that’s a position that can benefit its citizens. </p>
<p>China’s latest five-year plan, adopted in March, commits it to cut its “carbon intensity” (emissions per unit of GDP) by <a href="https://www.carbonbrief.org/qa-what-does-chinas-14th-five-year-plan-mean-for-climate-change">18%</a>. If it beats that five-year target by just a bit (and it has beaten its previous five-year targets) its emissions will turn down from 2025. </p>
<p>It is aiming for <a href="https://theconversation.com/china-just-stunned-the-world-with-its-step-up-on-climate-action-and-the-implications-for-australia-may-be-huge-147268">net-zero emissions</a> by 2060.</p>
<h2>Australia needs China’s help</h2>
<p>The Intergovernmental Panel on Climate Change finds that Australia is especially <a href="https://theconversation.com/climate-change-has-already-hit-australia-unless-we-act-now-a-hotter-drier-and-more-dangerous-future-awaits-ipcc-warns-165396">susceptible</a> to global warming. We’re facing less rain in winter, longer heatwaves, drier rivers, more arid soil and worse droughts.</p>
<p>We are right to want China to do more, but the worst way to achieve it is to say “we won’t lift our ambition until you lift yours”.</p>
<p>Hardly ever a worthwhile strategy, it is particularly ineffective when we don’t have bargaining power.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-change-has-already-hit-australia-unless-we-act-now-a-hotter-drier-and-more-dangerous-future-awaits-ipcc-warns-165396">Climate change has already hit Australia. Unless we act now, a hotter, drier and more dangerous future awaits, IPCC warns</a>
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<p>The only power we’ve got is to set an example, unilaterally, as we did with tariffs. And to ramp up our ambition. </p>
<p>If Australia said it would do more, and didn’t quibble, it might just count for something. </p>
<p>It’s all we can do, and it’s the very best we can do.</p><img src="https://counter.theconversation.com/content/166154/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s usual approach to big international negotiations is to hold out, before reluctantly making “concessions”. It’s the wrong approach for trade, and the wrong approach for climate change.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1649472021-07-26T19:55:07Z2021-07-26T19:55:07ZHow a new trade deal could make it harder to improve life for Australians in aged care<figure><img src="https://images.theconversation.com/files/413047/original/file-20210726-23-1ceex3n.jpg?ixlib=rb-1.1.0&rect=1706%2C268%2C2150%2C1537&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Morrison and Trade Minister Birmingham sign the Regional Comprehensive Economic Partnership agreement in November 2020, Canberra.</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>The Regional Comprehensive Economic Partnership agreement signed in November 2020 between Australia and 14 nations including Singapore, Japan and China could make it harder to tighten the regulations relating to aged care.</p>
<p>This isn’t because of any special provisions the agreement contains, but because of a special provision that is missing.</p>
<p>As is <a href="https://theconversation.com/last-to-know-the-eu-knows-more-about-our-trade-talks-than-we-do-144196">common</a> with trade and investment deals signed by the Australian government, the text was only made public <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/RCEP/Treaty_being_considered">after it was signed</a>.</p>
<p>It will not have legal force until the parliament passes implementing legislation after a recommendation from the parliament’s Joint Standing Committee on Treaties, which will hold public hearings on Tuesday, Wednesday and Friday.</p>
<p>The <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/RCEP/Treaty_being_considered">Regulatory Impact Statement</a> presented to the inquiry by the Department of Foreign Affairs and Trade says the chapter on trade in services contains provisions that would “lock-in” existing regulation and require signatories to “not adversely modify existing regulation in particular services sectors”.</p>
<p>The provisions apply to all services other than those specifically exempted.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/weve-just-signed-the-worlds-biggest-trade-deal-but-what-is-the-rcep-150082">We've just signed the world's biggest trade deal, but what is the RCEP?</a>
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<p>Australia included in an <a href="https://www.dfat.gov.au/sites/default/files/rcep-annex-iii-schedule-of-australia.pdf">annex</a> to the agreement a list of services that are specifically exempted, being “the specific sectors and sub sectors or activities for which Australia may maintain existing, or adopt new or more restrictive, measures”.</p>
<p>The list includes income security or insurance, social security or insurance, social welfare, public education, public training, health, childcare, public utilities, public transport and public housing. It does not include aged care.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The omission is puzzling, since childcare is included.</p>
<p>The footnotes add “for greater certainty” that the measures listed include
the protection of personal information relating to health and children, and add “for the avoidance of doubt”, that they include measures relating to the collection of blood and subsidies under Medicare and the Pharmaceutical Benefits Scheme.</p>
<p>There are no footnotes for the avoidance of doubt about aged care.</p>
<h2>Protection for aged care not ensured</h2>
<p>It might be that the government believes its ability to regulate for improved aged care standards is protected by the exemptions for “health services” and “welfare services”. </p>
<p>But United Nations classifications used in trade agreements code aged care differently from health care and social welfare services.</p>
<p>If the government really does intend to protect its ability to legislate for improved aged care standards, it would be well advised to add in a specific exemption for aged care, for the avoidance of doubt.</p>
<h2>The royal commission wants tougher protection</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The <a href="https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-executive-summary.pdf">Royal Commission into Aged Care Quality and Safety</a> exposed multiple scandals caused by a lack of qualified staff and poor quality care, and recommended increases in staffing levels, increases in qualifications of staff and changes to licensing arrangements. </p>
<p>These are the types of tighter regulations the agreement could prevent, unless aged care is specifically exempted.</p>
<p>The Regional Comprehensive Economic Partnership will bind Australia, New Zealand, China, Japan, South Korea, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.</p>
<p>Companies considering investing in industries in those countries that aren’t specifically exempted (as aged care appears not to be in Australia) will be given an <a href="https://www.dfat.gov.au/sites/default/files/rcep-chapter-8.pdf">assurance</a> that state and federal governments won’t tighten rules relating to </p>
<blockquote>
<p>the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test</p>
</blockquote>
<p>As well, measures relating to qualification and licensing requirements must be “not more burdensome than necessary to ensure the quality of the service”.</p>
<p>The omission of a specific exemption for aged care might be an oversight.</p>
<h2>Australia could be placing itself at risk</h2>
<p>When negotiations for the Regional Comprehensive Economic Partnership began in 2012, the aged care industry was dominated by local not-for-profits. </p>
<p>The sector is now dominated by <a href="https://cictar.org/wp-content/uploads/2018/09/TJN_For-Profit_Aged_Care_Report.pdf">for-profit providers</a>, with a jointly-owned Singapore company, Opal, one of the largest. </p>
<p>Singapore is a party to the RCEP, giving it the right to initiate a state-to-state dispute before an international tribunal if it believes Australia has violated the agreement. </p>
<p>If the tribunal found in Singapore’s favour it could ban or tax Australian products. It is a possibility there might be time to avoid.</p><img src="https://counter.theconversation.com/content/164947/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patricia Ranald is an honorary research associate at the University of Sydney and the convener of the Australian Fair Trade and Investment Network</span></em></p>The Regional Comprehensive Economic Partnership agreement prevents signatories from tightening regulations, except in specified sectors — and aged care hasn’t been named as one of those exceptions.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1628412021-06-16T06:08:06Z2021-06-16T06:08:06ZThere’s a lot we don’t know about the UK trade agreement we are about to sign<p>We’re being told <a href="https://www.trademinister.gov.au/minister/dan-tehan/media-release/new-free-trade-agreement-deliver-jobs-and-business-opportunities-australia-and-united-kingdom">about</a> the new Australia-United Kingdom Free Trade Agreement, but not a lot about most of what’s in it.</p>
<p>After an in-principle agreement overnight, Australia released a five-page <a href="https://cdn.theconversation.com/static_files/files/1688/Australia-UK_FTA_background.pdf?1623815787">summary</a>.</p>
<p>Australian farmers will benefit from tariff-free access to the UK for limited amounts of Australian beef, lamb, sugar and dairy products to the UK (but will have to wait ten years for the full elimination of tariffs). Australian consumers will benefit from immediate zero tariffs on products like UK whiskey and cars. Longer working holiday visas may be available for citizens from both countries.</p>
<p>It will take at least a month for the deal to be finalised and signed, and only after the signing will the Australian public see the full text and a parliamentary committee be given the right to inquire into it but not change it. </p>
<p>This secrecy continues what’s become something of a tradition — one that has attracted the ire of the <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements">Productivity Commission</a> which in 2010 recommended the government commission and publish an independent and transparent assessment of future free trade agreements “at the conclusion of negotiations but before an agreement is signed”.</p>
<p>The parliament’s joint standing committee on treaties (the same one that will examine this agreement) began inquiring into the system mid <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Treaty-makingProcess">last year</a> and took <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">many submissions</a>, but still has not reported.</p>
<h2>As many as 30 unseen chapters</h2>
<p>The timing of the deal is driven by the UK’s post-Brexit desperation to sign one-on-one agreements and the greater prize of being part of the 11-nation Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) including Japan, Australia, Canada, New Zealand, Vietnam, Singapore, Malaysia, Brunei, Mexico, Chile and Peru which the UK has <a href="https://www.chathamhouse.org/2021/03/why-joining-cptpp-smart-move-uk">applied to join</a>.</p>
<p>Like the CPTPP, the Australia-UK Free Trade Agreement is likely to have as many as 30 chapters, some of which restrict the ability of governments to regulate in fields including medicines, essential services and data privacy. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">UK Trade Minister Greg Hands.</span>
<span class="attribution"><span class="source">Brian Minkoff/Shutterstock</span></span>
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<p>UK trade minister Greg Hands said last month he wants the deal to include investor-state dispute settlement (ISDS) provisions of the kind excluded from the Australia-European Union current trade talks, and from the <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Regional Comprehensive Economic Partnership </a>recently signed with Japan, China, South Korea, New Zealand and the 10 ASEAN countries.</p>
<p>The provisions would allow UK firms to sue Australian governments in international tribunals over decisions they believed infringed on their interests in a way Australian firms could not.</p>
<p>In return Australian firms could sue UK authorities in a way UK firms could not.</p>
<p>But UK companies are more frequent users of ISDS, having launched <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement/country/221/united-kingdom/investor">90</a> recorded ISDS cases, the third most after the US and the Netherlands. Australian companies have launched <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement/country/11/australia/investor">nine</a>.</p>
<p>Defending the idea in the House of Commons, Hands said the UK had “<a href="https://hansard.parliament.uk/Commons/2021-05-27/debates/759585C3-375D-4EBA-BB6A-08B217C75017/AgriculturalExportsFromAustraliaTariffs?highlight=isds#contribution-CBFF5C34-9754-42FC-AD84-9688A3C11272">never lost an ISDS case</a>”.</p>
<p>There are now <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement">1,104,</a> known ISDS cases with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_1.pdf#overlay-context=Against_ISDS">health</a> and environment laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a> and to protect <a href="http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C3745/DS10808_En.pdf">indigenous rights</a>. </p>
<p>Australians remember that the US <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Philip Morris</a> tobacco company used an obscure Hong Kong investment agreement to sue Australia for billions over our plain packaging law. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/last-to-know-the-eu-knows-more-about-our-trade-talks-than-we-do-144196">Last to know: the EU knows more about our trade talks than we do</a>
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<p>It took the international tribunal almost five years to decide that Philip Morris was not a <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Hong Kong</a> company as it had claimed. Australia had to pay $12 million in legal costs.</p>
<p>ISDS rules in the Australia-UK treaty would give UK mining companies such as Rio Tinto the right to claim <a href="https://www.theguardian.com/commentisfree/2021/jun/01/a-clause-in-the-uk-australia-trade-deal-could-let-companies-sue-governments-we-have-been-here-before">compensation</a> for new laws to protect Indigenous heritage areas, and UK aged care companies such as Bupa the right to claim compensation for new regulations arising from the Aged Care Royal Commission.</p>
<h2>Longer pharmaceutical monopolies</h2>
<p>The UK has also said in its <a href="https://www.gov.uk/government/publications/uks-approach-to-negotiating-a-free-trade-agreement-with-australia/uk-australia-free-trade-agreement-the-uks-strategic-approach">negotiating objectives</a> that it wants to preserve its “existing intellectual property standards” which include rules that provide for longer data protection monopolies on medicines than Australia has. </p>
<p>The UK also supported this demand as a member of the EU before Brexit when it was <a href="http://trade.ec.europa.eu/doclib/docs/2018/july/tradoc_157190.pdf">published by the EU</a> as part of the ongoing EU-Australia FTA negotiations.</p>
<p>Pharmaceutical companies already have 20 year monopolies on new medicines.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/planned-trade-deal-with-europe-could-keep-medicine-prices-too-high-102836">Planned trade deal with Europe could keep medicine prices too high</a>
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<p>The UK has an additional “data protection” monopoly of up to ten years before data is released enabling production of cheaper competitors.</p>
<p>The current Australian standard is five years. Adopting the UK standard would delay the availability of cheaper medicines, costing Australia’s Pharmaceutical Benefits Scheme <a href="https://theconversation.com/planned-trade-deal-with-europe-could-keep-medicine-prices-too-high-102836">hundreds of millions</a> of dollars per year.</p>
<p>Unless the text is released before it is signed, we won’t know whether ISDS and longer medicine monopolies are part of the deal.</p>
<p>The Australian government should release the text for public scrutiny and independent assessment of its costs and benefits before it is signed, so that we are able to see what is being traded away before it’s too late.</p>
<hr>
<p><em>June 18, 2021: Since this article was published, the Australian and UK governments have responded to public concerns about secrecy by publishing the <a href="https://www.dfat.gov.au/trade/agreements/negotiations/aukfta/australia-uk-fta-negotiations-agreement-principle#investment">Agreement in Principle</a>. The agreement rules out the inclusion of Investor State Dispute Settlement (ISDS) procedures.</em> </p>
<p><em>Both of these developments are welcome. However the Agreement in Principle does not give detailed information about the up to 30 chapters which are still being negotiated behind closed doors. For instance, the section on intellectual property has no detail about whether the UK standard for longer medicine monopolies will be included in the deal.</em></p><img src="https://counter.theconversation.com/content/162841/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is an honorary research associate at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network. </span></em></p>Australia won’t release the text until after it is signed.Patricia Ranald, Honorary research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1609222021-05-18T03:50:30Z2021-05-18T03:50:30ZNew Zealand is overdue for an open and honest debate about 21st-century trade relations<figure><img src="https://images.theconversation.com/files/401112/original/file-20210517-15-7z6onb.jpg?ixlib=rb-1.1.0&rect=38%2C7%2C5137%2C3437&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Anti-TPPA protesters march down Auckland's Queen Street in 2015.</span> <span class="attribution"><span class="source">GettyImages</span></span></figcaption></figure><p>With more countries considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (<a href="https://www.mfat.govt.nz/br/trade/free-trade-agreements/free-trade-agreements-in-force/comprehensive-and-progressive-agreement-for-trans-pacific-partnership-cptpp/">CPTPP</a>), New Zealand urgently needs a real public debate on the future of such trade and investment agreements.</p>
<p>In February this year the UK <a href="https://www.bbc.com/news/business-55871373">formally applied</a> to join as part of its quest for post-Brexit free trade agreements. Reportedly, <a href="https://www.bangkokpost.com/business/2063435/another-3-months-of-studies-followed-by-cptpp-decision">Thailand</a>, <a href="https://en.yna.co.kr/view/AEN20210111003900320">South Korea</a>, the <a href="https://business.inquirer.net/319987/ph-wants-to-join-mega-free-trade-pact">Philippines</a>, <a href="https://www.scmp.com/news/china/diplomacy/article/3113901/taiwan-aims-be-eligible-join-cptpp-beijing-must-revisit-japan">Taiwan</a> and even <a href="https://www.gtreview.com/news/asia/93979/">China</a> are to varying degrees considering membership.</p>
<p>Coverage of these developments is often overly simplistic, treating expansion as a notch in the belt for those who see the CPTPP as shaping the 21st century’s global trade rules.</p>
<p>Behind the headlines, the reality is more complex. Given the CPTPP restricts governments’ ability to regulate their own economies in return for notional benefits, it warrants closer scrutiny from all sides.</p>
<p>But the secrecy surrounding possible new memberships makes scrutiny difficult, just as it earlier hindered independent assessments of the Trans-Pacific Partnership Agreement (<a href="https://www.tpp.mfat.govt.nz/">TPPA</a>) and subsequent CPTPP negotiations.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1389864202915835904"}"></div></p>
<h2>Blueprint for a neoliberal trade agenda</h2>
<p>The original TPPA was always intended as a blueprint for future trade relations across the Asia-Pacific region (with the now-abandoned Transatlantic Trade and Investment Partnership proposing similar rules for US-EU trade).</p>
<p>New Zealand was primarily committed to the TPPA as an opportunity to secure a free trade agreement (FTA) with the United States, regardless of the costs.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-has-a-great-chance-to-engage-in-trade-diplomacy-with-china-and-it-must-take-it-154737">Australia has a great chance to engage in trade diplomacy with China, and it must take it</a>
</strong>
</em>
</p>
<hr>
<p>Despite vociferous <a href="https://www.rnz.co.nz/news/national/258894/thousands-of-nzers-rally-against-tppa">public protest</a> against its potential to erode national sovereignty, which forced discussion out of the shadows, the National government signed the TPPA anyway.</p>
<p>The Labour, New Zealand First and Green parties all opposed its ratification in the select committee, as did Māori in the Waitangi Tribunal. National ignored them again, ratifying the text in May 2017.</p>
<figure class="align-center ">
<img alt="Singapore's Minister for Trade and Industry Lim Hng Kiang shaking hands with New Zealand Prime Minister John Key" src="https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401109/original/file-20210517-13-4t45ir.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Singapore’s Minister for Trade and Industry Lim Hng Kiang with New Zealand Prime Minister John Key after signing the Trans Pacific Partnership in Auckland in 2016.</span>
<span class="attribution"><span class="source">GettyImages</span></span>
</figcaption>
</figure>
<h2>Labour does a U-turn</h2>
<p>Before the 2017 election, with the TPPA’s public support in tatters, the Labour Party was keen to paint itself as part of the increasingly popular movement against corporate-led globalisation.</p>
<p>Its minority report to the <a href="https://www.parliament.nz/en/pb/sc/reports/document/51DBSCH_SCR68965_1/international-treaty-examination-of-the-trans-pacific-partnership">select committee</a> noted:</p>
<blockquote>
<p>The Labour Party wishes to protest in the strongest terms at the government’s failure to effectively represent the long-term interests of New Zealand in the Trans-Pacific Partnership negotiations.</p>
</blockquote>
<p>And yet when the incoming Trump Administration <a href="https://www.politico.com/story/2019/01/23/trans-pacific-trade-pact-2017-1116638">stepped back</a> from the TPPA in early 2017, Labour turned cheerleader for a slightly modified CPTPP agreement.</p>
<p>In government Labour argued the necessary changes had been made to make the agreement acceptable, but in reality hardly anything had changed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-american-farmers-could-gain-by-rejoining-the-asia-pacific-trade-deal-that-trump-spurned-152148">What American farmers could gain by rejoining the Asia-Pacific trade deal that Trump spurned</a>
</strong>
</em>
</p>
<hr>
<p>A few provisions, mainly on intellectual property rights, were <a href="https://www.mfat.govt.nz/assets/Trade-agreements/CPTPP/ANNEX-II_LIst-of-suspended-Provisions.pdf">suspended</a> but not withdrawn, while a series of side letters of <a href="https://researcharchive.vuw.ac.nz/xmlui/bitstream/handle/10063/8485/paper_access.pdf?sequence=1">questionable legal value</a> meant investors from Australia and Peru could not challenge New Zealand laws or decisions directly in dubious offshore tribunals.</p>
<p>But investors from other parties to the CPTPP – Japan, Singapore, Brunei, Malaysia, Chile, Canada and Vietnam – could still bring controversial investor-state disputes.</p>
<p>What’s more, the Labour government never withdrew ratification of the TPPA, and rolled out the same <a href="https://www.mfat.govt.nz/assets/Trade-agreements/CPTPP/CPTPP-Final-National-Interest-Analysis-8-March.pdf">economic modelling</a> it had previously stridently criticised to justify its new-look CPTPP. </p>
<figure class="align-center ">
<img alt="Jacinda Ardern and Winston Peters at a cabinet meeting" src="https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/401110/original/file-20210517-13-1yjndp4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">On the same side: Prime Minister Jacinda Ardern and deputy Winston Peters at a cabinet meeting after forming a coalition government in 2017.</span>
<span class="attribution"><span class="source">GettyImages</span></span>
</figcaption>
</figure>
<h2>What’s in it for New Zealand?</h2>
<p>Countries wanting to join the CPTPP need agreement from existing parties, one by one. Each of the 11 member countries can extract a price beyond what is already in the CPTPP.</p>
<p>That level of bargaining makes it extremely difficult to secure new exemptions or concessions, or even equivalent protections for regulation of investments, services or government procurement contracts in the agreement’s various schedules. In reality, countries wanting to join will have to give a lot more.</p>
<p>New Zealand, for example, has described a bilateral free trade agreement as a “stepping stone” to the UK joining the CPTPP. What price will New Zealand demand? More <a href="https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/nz-welcomes-uk-but-must-walk-the-talk">market access</a> for agriculture (despite the recognised need to diversify the economy and markets) and no investor-state disputes.</p>
<p>The UK wants <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/901870/uk-strategy-uk-nz-free-trade-agreement.pdf">fewer limits</a> on its financial and professional services firms, stronger intellectual property rights for its pharmaceutical, manufacturing and media industries, more access to government procurement, inclusion of investor-state dispute settlement or an equivalent, and more. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/corporations-prepare-to-sue-as-pandemic-reveals-trade-flaws-136604">Corporations prepare to sue as pandemic reveals trade flaws</a>
</strong>
</em>
</p>
<hr>
<p>Why would New Zealand make such a deal? Because of the bipartisan belief that more free trade agreements are always better, regardless of the evidence showing they compound the risks to regulatory sovereignty.</p>
<p>Why would the UK put itself through this? Partly because its political leaders and trade officials are driven by the same ideology. Partly because it needs to show it can replace EU membership with other “special relationships”.</p>
<p>Ironically, Brexit was sold as restoring UK sovereignty, whereas the CPTPP would take even more of it away. But the familiar veil of secrecy prevents scrutiny and an objective cost-benefit analysis.</p>
<h2>Another free trade merry-go-round</h2>
<p>What about the likes of Thailand, the Philippines or South Korea? All three already have multiple FTAs with most CPTPP parties.</p>
<p>New Zealand, for example, has an <a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/nz-korea-free-trade-agreement/">FTA with South Korea</a>, which is also a party to the Regional Comprehensive Economic Partnership (<a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/regional-comprehensive-economic-partnership-rcep/rcep-overview">RCEP</a>) just signed this year. The Philippines is a party to the New Zealand-Australia FTA with ASEAN and the RCEP. New Zealand has a bilateral <a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/nz-thailand-closer-economic-partnership/">FTA with Thailand</a> as well.</p>
<p>It’s hard to imagine why those countries would give New Zealand greater market access than they were prepared to already, especially in the RCEP, and accept the CPTPP’s more onerous restrictions on their domestic policies and laws. Yet reports suggest they are eager to engage in this Faustian bargain.</p>
<p>The CPTPP risks becoming another merry-go-round in the largely secretive circus of free trade agreements. Countries seem willing to climb on board without prior public scrutiny or any compelling rationale.</p>
<p>It’s time to pull back the curtains and have an open and honest debate about the kind of trade relations New Zealand and other nations really need for the 21st century.</p><img src="https://counter.theconversation.com/content/160922/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane Kelsey does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More countries, including a post-Brexit UK, are looking at joining the CPTPP free trade agreement. But the secrecy around negotiations makes serious analysis virtually impossible.Jane Kelsey, Professor of Law, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1530982021-01-12T23:41:23Z2021-01-12T23:41:23ZWhat’s at stake for NZ in Australia’s case against China at the World Trade Organisation?<figure><img src="https://images.theconversation.com/files/378443/original/file-20210112-21-qcdjdr.jpg?ixlib=rb-1.1.0&rect=10%2C0%2C6979%2C3594&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>With the relationship between China and Australia souring in the past six months, New Zealand’s response will need to be nuanced and careful, but also principled.</p>
<p>First and foremost, we must ensure the dispute between two of our main trading partners stays partitioned from our role within the Five Eyes security alliance. If they become muddied, our economic relationship with China will suffer.</p>
<p>This is complicated by Australia’s recent forthright positions on a number of strategic issues, including an insistence that the World Health Organisation (WHO) conduct a robust inquiry into the origins of COVID-19, and criticism of China’s actions in Hong Kong.</p>
<p>By accident or design, Australia has appeared to be in the front line of Western criticism of Beijing — and has been subjected to a growing list of export restrictions in return.</p>
<p>Chinese authorities have asserted that Australia is unfairly dumping (selling below cost) or subsidising many of its exports, and have imposed tariffs on wines (<a href="https://www.bbc.com/news/business-55097100">up to 200%</a>) and barley (<a href="https://www.theguardian.com/business/2020/may/20/why-has-china-slapped-tariffs-on-australian-barley-and-what-can-australia-do-about-it">up to 80%</a>).</p>
<p>Other export products, such as <a href="https://www.scmp.com/economy/china-economy/article/3112456/china-australia-relations-import-ban-sees-australian-lobster">lobster</a>, have been blocked by more indirect means, such as additional hygiene requirements. Claims of pest threats have affected <a href="https://www.abc.net.au/news/2020-12-09/farmers-want-australia-china-tariffs-trade-dispute-to-wto/12964248">timber</a> shipments, and <a href="https://www.abc.net.au/news/2020-12-08/china-suspends-australian-beef-imports-latest-trade-hit/12958950">meat</a> supply lines have been disrupted by concerns over labelling and health certificates.</p>
<p>Beyond this, <a href="https://www.cnbc.com/2020/12/15/australia-says-it-will-pursue-all-avenues-on-reports-of-china-coal-restrictions-.html">coal</a> has been affected by preferential treatment for other producers. Iron ore is the only Australian export that has so far not been targeted — Australia dominates the international market and China has an insatiable demand.</p>
<figure class="align-center ">
<img alt="World Trade Organisation headquarters building" src="https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378441/original/file-20210112-15-1ya0mt4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">WTO headquarters in Geneva: resolution of trade disputes can be a long, drawn-out process.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Why the WTO is vital</h2>
<p>Australia has now <a href="https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=269591&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True">taken its concerns</a> to the World Trade Organisation (WTO), with barley seen as the best case (although other products may follow). If the consultation process over the next few months fails, a panel will be created to rule on the matter.</p>
<p>There is a lot at stake here, and New Zealand will want to pay close attention because of the wider ramifications. Australia, like New Zealand, has a <a href="https://www.dfat.gov.au/trade/agreements/in-force/chafta/Pages/australia-china-fta">free trade agreement</a> with China which has seen strong growth since 2015. The value of Australian exports to China has doubled, from AU$75 billion to $150 billion in five years. </p>
<p>China makes up a whopping <a href="https://www.dfat.gov.au/about-us/publications/trade-investment/trade-at-a-glance/trade-investment-at-a-glance-2019/Pages/default">30.6%</a> of Australia’s top ten export markets — more than double Japan, the second most important market. At <a href="https://www.abs.gov.au/articles/australias-trade-goods-china-2020">56%</a> of the total value of those exports, iron ore swamps all other trade streams. </p>
<p>New Zealand has experienced similar growth, with <a href="https://www.mfat.govt.nz/en/countries-and-regions/north-asia/china/">two-way trade increasing</a> from $NZ10 billion in 2007 to over $30 billion today. Around 28% of all New Zealand exports <a href="https://www.stats.govt.nz/news/exports-to-china-rise-strongly-in-january">go to China</a>, including more than a quarter of dairy, about half of all meat, and almost two-thirds of wood exports.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1347780138448998403"}"></div></p>
<p>But going to the WTO will not be a quick or easy process. It could drag on for years, especially if there are appeals, which is likely given both countries are veterans at this and both are quite litigious.</p>
<p>Australia has been a <a href="https://www.wto.org/english/thewto_e/countries_e/australia_e.htm">complainant in nine cases</a>, a respondent in 16, and a third party in 112. China has been a <a href="https://www.wto.org/english/thewto_e/countries_e/china_e.htm">complainant in 21</a>, a respondent in 44, and a third party in 166. By comparison, <a href="https://www.wto.org/english/thewto_e/countries_e/new_zealand_e.htm">New Zealand</a> has been a complainant in nine, a third party in 61, but never a respondent.</p>
<p>Both Australia and China have recorded wins and losses. China <a href="https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds516_e.htm">lost to the European Union</a> but did score a <a href="https://www.bbc.com/news/business-54168419">victory</a> over Donald Trump’s trade restrictions. Australia recently <a href="https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds529_e.htm">lost to Indonesia</a>, and lost earlier to New Zealand with its wrongful biosafety measures keeping our apples out of their market for nearly 100 years. But overall, Australia’s record at the WTO generally suggests more wins than losses.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/china-enters-2021-a-stronger-more-influential-power-and-australia-may-feel-the-squeeze-even-more-150943">China enters 2021 a stronger, more influential power — and Australia may feel the squeeze even more</a>
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</em>
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<h2>Supporting a rules-based international order</h2>
<p>The good news is that going to the WTO for resolution endorses the rules of international trade law (and a rules-based international order in general) — not an order based on the arbitrary power of the strongest. This is exactly what globalisation should look like.</p>
<p><a href="http://english.www.gov.cn/archive/white_paper/2018/06/28/content_281476201898696.htm">China</a>, like Australia, publicly professes to be a good member of the WTO. Both have adhered to a <a href="https://trade.ec.europa.eu/doclib/press/index.cfm?id=2176">temporary appeals process</a> as a way to bypass the Trump administration’s <a href="https://foreignpolicy.com/2019/12/09/trump-may-kill-wto-finally-appellate-body-world-trade-organization/">attempts to undermine</a> the WTO’s ability to resolve trade disputes.</p>
<p>While some in the US have <a href="https://ustr.gov/sites/default/files/2019_Report_on_China%E2%80%99s_WTO_Compliance.pdf">cast doubt</a> on China’s compliance with WTO rules, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3476969">other analyses</a> suggest Chinese compliance with the dispute settlement mechanism is <a href="https://www.cato.org/publications/policy-analysis/disciplining-chinas-trade-practices-wto-how-wto-complaints-can-help">respectable</a> and better than is commonly portrayed.</p>
<p>Indeed, while compliance may sometimes be less than perfect, there are no cases of China simply ignoring rulings against itself.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vital-signs-australian-barley-growers-are-the-victims-of-weaponised-trade-rules-139037">Vital Signs: Australian barley growers are the victims of weaponised trade rules</a>
</strong>
</em>
</p>
<hr>
<h2>NZ should become a third party</h2>
<p>Perhaps the best news is that this dispute has stayed within the trade arena and has not spilled into the area of strategic alliances. This is despite the Five Eyes partners having <a href="https://www.news.com.au/finance/work/leaders/five-eyes-alliance-considers-sanctioning-china/news-story/828f488272f5fdc6202f3fddfb171dc4">reportedly discussed</a> widening their focus beyond security to include economic retaliation.</p>
<p>As well as doing what it can to ensure this remains the case, New Zealand (with other interested countries) should seriously consider becoming a third party to the WTO in this dispute.</p>
<p>To do so would mean we would need to demonstrate a “<a href="https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm#10">substantial interest</a>” in the case. This need not be only economic, but could involve the impact of the measures in question on the overall trading system.</p>
<p>If we do this, New Zealand should make clear this is not a Gallipoli moment where we are blindly following our ANZAC sibling. Our engagement should be in defence of a higher principle, albeit where trade is the context. Only a rules-based order, premised on international law and independent, binding processes can make the future secure for all players, large and small.</p><img src="https://counter.theconversation.com/content/153098/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Gillespie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New Zealand should recognise the high stakes and join the China-Australia WTO hearing as a third party.Alexander Gillespie, Professor of Law, University of WaikatoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1493402020-12-04T13:30:10Z2020-12-04T13:30:10ZWhy Biden will find it hard to undo Trump’s costly ‘America first’ trade policy<figure><img src="https://images.theconversation.com/files/372857/original/file-20201203-21-7nl64t.jpg?ixlib=rb-1.1.0&rect=182%2C239%2C6208%2C4167&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Biden says his Cabinet picks will help him restore American leadership in the world.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/president-elect-joe-biden-speaks-during-a-cabinet-news-photo/1229768384">Chandan Khanna/AFP via Getty Images</a></span></figcaption></figure><p>Since becoming president-elect, Joe Biden has signaled that <a href="https://joebiden.com/americanleadership/">restoring America’s leadership</a> on the world stage is among his highest priorities – an intention <a href="https://apnews.com/article/joe-biden-donald-trump-politics-susan-rice-national-security-06a33397de673043360ba6b5fd78af8a">aptly demonstrated</a> by his Cabinet picks.</p>
<p>Biden’s nominees are “ready to lead the world, not retreat from it,” <a href="https://www.nytimes.com/live/2020/11/24/us/joe-biden-trump">he said on Nov. 24</a>. “America is back.”</p>
<p>Perhaps nowhere is this return more urgent than in trade policy, a topic I follow closely as a <a href="https://cas.gsu.edu/profile/charles-hankla/">scholar of international political economy</a>. Over the past four years, President Donald Trump has <a href="https://theconversation.com/what-is-the-tpp-and-can-the-us-get-back-in-95028">ripped up trade deals</a>, launched <a href="https://www.channelnewsasia.com/news/commentary/us-china-trade-war-implications-effects-impact-trump-us-election-13382878">damaging trade wars</a> and <a href="https://theconversation.com/trumps-go-it-alone-approach-to-china-trade-ignores-wtos-better-way-to-win-93918">gunked up</a> the workings of international trade organizations. </p>
<p>All of this <a href="https://www.nytimes.com/2020/11/15/business/china-trade-rcep.html">has ceded global economic leadership</a> to China, as we can see from the trade negotiations Beijing recently oversaw with 14 other Asian nations. In November, the countries met in China’s capital and formally signed what is now the world’s largest regional free trade pact, covering nearly a third of humanity.</p>
<p>Biden <a href="https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again">no doubt longs to return</a> to some semblance of the “golden era” of U.S. leadership, the half-century following World War II when <a href="https://www.rand.org/content/dam/rand/pubs/research_reports/RR2200/RR2226/RAND_RR2226.pdf">America helped create</a> and sustain the rules and institutions that fueled globalization. </p>
<p>But after four years of <a href="https://www.cnn.com/2020/11/01/world/trump-us-global-leadership-election-analysis-intl/index.html">Trump’s “retreat,”</a> it may be harder to return to leading than Biden thinks – thanks to the growing number of Americans on both the right and the left who are skeptical of free trade. </p>
<h2>The costs of ‘America first’</h2>
<p>While Trump advocated a trade policy he labeled “<a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">America first</a>,” it’s probably not the best description. </p>
<p>The policy has involved applying <a href="https://www.americanactionforum.org/research/the-total-cost-of-trumps-new-tariffs/">punitive tariffs</a> on specific products such as steel and aluminum and on whole countries – most notably China – at a scale not seen in decades. But the price to the U.S. has been high.</p>
<p>Trump’s tariffs have <a href="https://www.reuters.com/article/us-usa-trade-economy/trumps-tariffs-cost-u-s-companies-46-billion-to-date-data-shows-idUSKBN1Z8222">cost American businesses</a> and <a href="https://www.forbes.com/sites/stuartanderson/2019/09/09/trump-tariffs-will-soon-cost-us-families-thousands-of-dollars-a-year/?sh=3cb94cca5b4b">consumers</a> tens of billions of dollars. And they have seriously hurt <a href="https://www.nytimes.com/2020/06/19/business/economy/trump-china-trade-war-farmers.html">U.S. farmers</a> and <a href="https://www.reuters.com/article/us-health-coronavirus-tariffs/trumps-tariffs-add-to-pandemic-induced-turmoil-of-u-s-manufacturers-idUSKBN22C1MY">manufacturers</a> by closing off export markets for American products in China and elsewhere. Moreover, the administration <a href="https://theconversation.com/most-us-farmers-remain-loyal-to-trump-despite-pain-from-trade-wars-and-covid-19-146535">has spent tens of billions more</a> trying to aid farmers harmed by the tariffs. </p>
<p>Putting Americans first was also the <a href="https://www.whitehouse.gov/presidential-actions/presidential-memorandum-regarding-withdrawal-united-states-trans-pacific-partnership-negotiations-agreement/">stated reason</a> behind the president’s decision to withdraw from trade deals like the <a href="https://theconversation.com/what-is-the-tpp-and-can-the-us-get-back-in-95028">Trans-Pacific Partnership</a> and focus on bilateral rather than multilateral agreements. Aside from denying American companies the benefits free trade pacts provide, this also has meant the U.S. <a href="https://www.reuters.com/article/us-usa-trump-business/trump-pulls-u-s-out-of-pacific-trade-deal-loosening-asia-ties-idUSKBN1571FD">increasingly sits on the sidelines</a> when global trade rules are being written.</p>
<p>That’s bad news for America because even when rules apply only to the trade agreement in question, they generally serve as a <a href="https://academic.oup.com/jiel/article-abstract/20/2/365/3865559">foundation for future deals</a> – including negotiations exclusively with the U.S. So if the U.S. government isn’t at the table, it could have long-term ramifications. </p>
<p>In America’s stead, other powerhouses will seek to dictate the terms of trade with U.S. allies, as Beijing did with the trade accord it signed in November. And Chinese interests – on the environment, labor standards and especially intellectual property protection – are not the same as those of the U.S. </p>
<h2>Biden and the populist right</h2>
<p>So there are very strong reasons to reengage with the world. Global trade may even be key to <a href="https://www.csis.org/analysis/trade-policy-can-lead-covid-19-economic-recovery">helping the U.S. recover</a> from the coronavirus pandemic. But to do so, Biden will have to navigate two groups that could be a thorn in his side. </p>
<p>The first is the <a href="https://items.ssrc.org/democracy-papers/return-with-a-vengeance-working-class-anger-and-the-rise-of-populism/">populist right</a> – conservative, mostly working-class voters who warmed to Trump’s anti-trade platform in 2016. </p>
<p>Like Trump, they tend to see trade through a nationalist lens in which the “winner takes all.” That is, they understand trade <a href="https://www.marketwatch.com/story/why-trump-hates-imports-and-why-thats-bananas-2019-09-06">not as beneficial</a> for all parties but rather as a competition that can be won or lost based on who’s <a href="https://foreignpolicy.com/2020/02/24/trump-trade-war-china-europe-deficit/">running a trade surplus</a> or who’s gaining or losing market share. </p>
<p>Furthermore, as the <a href="https://www.theatlantic.com/education/archive/2018/11/education-gap-explains-american-politics/575113/">base of the Republican Party</a> increasingly <a href="https://www.pewresearch.org/politics/2020/06/02/in-changing-u-s-electorate-race-and-education-remain-stark-dividing-lines/">shifts to encompass</a> less educated white voters, this has critical implications for the GOP. <a href="https://rodrik.typepad.com/dani_rodriks_weblog/2008/06/stolper-samuelson-for-the-real-world.html">Basic trade theory</a> suggests that, in a rich country such as the United States, lower-skilled workers are hurt by free trade, while skilled workers and capitalists get most of the benefits. This is because lower-income countries will have a comparative advantage in lower-skilled labor.</p>
<p>Many <a href="https://www.prri.org/spotlight/tpp-free-trade-agreements/">working-class voters</a> are understandably feeling left behind by this new economy and ignored by the government. Free trade has become a target of their ire, helping drive the Republican Party’s shift toward nationalism – and protectionism – and shoving aside the traditional pro-business conservatives. </p>
<p>If <a href="https://www.politico.com/news/georgia-senate-runoff-2021-latest-race-updates-and-polls">Republicans manage to hold onto</a> the Senate in January, it’s very likely that the growing power of the populist right will continue to influence trade skepticism in the party. This would tie Biden’s hands when it comes to negotiating new trade deals or taking other steps that will require Senate approval. </p>
<p>But even if Democrats manage to take the Senate, Biden will likely still need to court these working-class, mostly white voters when he seeks to maintain his congressional majorities in the midterms. Either way, they will remain a potent force well after Trump is gone. </p>
<h2>The protectionist left</h2>
<p>But the populist right is not the only important part of the U.S. political spectrum that is skeptical of trade. </p>
<p>The populist left – <a href="https://berniesanders.com/issues/fair-trade/">led especially by Sen. Bernie Sanders</a> – <a href="https://doi.org/10.1177/0032321717723505">has long favored</a> limiting foreign trade. Its motivations are somewhat different, focused more on a skepticism of corporate power and trade’s impact on labor rights and the environment. But they are also similar when it comes to the <a href="https://www.nytimes.com/2020/03/09/us/politics/bernie-sanders-voters.html">many working-class Americans</a> and <a href="https://poll.qu.edu/national/release-detail?ReleaseID=3655">young people</a> who form the left wing of the Democratic Party. </p>
<p>In the primaries, Biden beat Sanders and others who offered a more skeptical view of trade. But still, he will have to <a href="https://www.nytimes.com/2020/10/28/business/economy/democrats-biden-trade.html">accommodate the new energy</a> coursing through the left in America, including when it comes to <a href="https://www.cnbc.com/2020/03/09/biden-vs-sanders-trade-fight-is-war-for-future-of-democratic-party.html">its views on trade</a>. And the populist left will have a lot more power than the right in Biden’s Washington, from members of Congress to key Democratic interest groups like <a href="https://foreignpolicy.com/2020/11/05/protectionism-trump-biden-buy-american-tariffs">labor unions</a>. </p>
<h2>Potent populists</h2>
<p>A pro-trade optimist might point out that polls, like <a href="https://news.gallup.com/poll/286730/americans-vanishing-fear-foreign-trade.aspx">this one conducted in late 2019</a>, suggest overwhelming support for free trade among voters in both parties. Polls, however, don’t always measure how strongly and consistently these views are held. </p>
<p>What’s more, because the <a href="https://econpapers.repec.org/bookchap/cupcbooks/9780521362474.htm">harms of free trade are more concentrated</a> than its benefits, the minority of voters who push for protectionist policies are often more powerful than their numbers might suggest. Ultimately, although populists on the right and the left represent a minority position on trade, they will remain potent political forces for the foreseeable future.</p>
<p>[<em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>.]</p>
<p>For these reasons, I believe it is unlikely that Biden will be able to return to business as usual on trade. While Trump’s aggressive protectionism will likely go away, Biden will probably keep up the pressure on China and <a href="https://www.nytimes.com/2020/12/02/opinion/biden-interview-mcconnell-china-iran.html">has already adopted</a> some of his predecessor’s “America first” rhetoric to appeal to the working class. And for his more progressive supporters, you’ll likely see him push for stronger labor and environmental protections in future trade agreements. </p>
<p>Biden might not be able to throw the door to global trade wide open, but he should be able to keep it from shutting any further.</p><img src="https://counter.theconversation.com/content/149340/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla has donated to and volunteered with the Democratic Party of Georgia.</span></em></p>President-elect Biden hopes to restore America’s global leadership on issues like trade, but populists in both parties may make his job a lot harder.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1453342020-09-09T20:07:59Z2020-09-09T20:07:59ZClive Palmer versus (Western) Australia. He could survive a High Court loss if his company is found to be “foreign”<p>We may not like Clive Palmer as a person, or his business activities, or his politics, but from a legal perspective that should not matter. </p>
<p>All of us, rich or poor, should have equal rights under the rule of law, including access to independent review mechanisms. </p>
<p>So we should be concerned in principle about the oddly-named <a href="https://www.parliament.wa.gov.au/Parliament/Bills.nsf/2F1CFD31ACD372EE482585C100337061/$File/Bill%2B205-1.002.002.pdf">Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Amendment Act</a>. </p>
<p>It was hastily passed by the Western Australian parliament on August 13 in order to legislate away Palmer’s rights under a contract with Western Australia regarding the Balmoral South mining project. </p>
<p>Former High Court judge Michael McHugh upheld those rights in 2014 and 2019 arbitration awards.</p>
<p>The Act declares the contract to have no effect (s9) and declares both arbitration awards to have no effect (s7). </p>
<p>It makes the contract’s arbitration clause “not valid” (s10).</p>
<p>It says Western Australia cannot be sued and has no liability in any project-related dispute (s11). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=214&fit=crop&dpr=1 600w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=214&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=214&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=269&fit=crop&dpr=1 754w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=269&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=269&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.parliament.wa.gov.au/Parliament/Bills.nsf/2F1CFD31ACD372EE482585C100337061/$File/Bill%2B205-1.002.002.pdf">Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Amendment Act 2020</a></span>
</figcaption>
</figure>
<p>Rules of “natural justice” (including any duty of procedural fairness) are said not to apply to the West Australian government’s conduct, past or future (s12). </p>
<p>Palmer and associates must indemnify Western Australia against any loss connected with them including reduced funding from the Commonwealth (s14).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-wa-government-legislated-itself-a-win-in-its-dispute-with-clive-palmer-and-put-itself-above-the-law-144360">The WA government legislated itself a win in its dispute with Clive Palmer — and put itself above the law</a>
</strong>
</em>
</p>
<hr>
<p>Palmer has challenged the statute <a href="https://www.abc.net.au/news/2020-08-26/clive-palmer-suing-mark-mcgowan-john-quigley-in-new-legal-action/12596538">under Australian law</a>. There’s every chance the case will make it to the High Court. </p>
<p>But even that might not be the end of the matter.</p>
<p>He has also foreshadowed a challenge under <a href="https://www.afr.com/companies/mining/wa-s-palmer-legislation-could-end-up-costing-the-commonwealth-billions-20200818-p55mum">international law</a> of the kind allowed under several of Australia’s free trade agreements. </p>
<h2>Palmer might say his company is foreign</h2>
<p>He says his Balmoral South project is an investment made by Mineralogy International, registered in Singapore (and reportedly perhaps <a href="https://thewest.com.au/business/mining/palmer-to-put-himself-first-with-singapore-sling-ng-b881101575z">for this purpose</a>), and so is protected under a free trade agreement. </p>
<p>Australia’s <a href="https://www.dfat.gov.au/trade/agreements/in-force/safta/Pages/singapore-australia-fta">Free Trade Agreement with Singapore</a> was signed in 2003 and amended in 2017 to refine its <a href="https://theconversation.com/au/topics/isds-16000">investor-state dispute settlement</a> provisions bringing them into line with the <a href="https://www.dfat.gov.au/trade/agreements/in-force/cptpp/Pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a>, in force between Australia and six other nations including Singapore and also the so-called <a href="https://www.dfat.gov.au/trade/agreements/in-force/aanzfta/Pages/general-review-of-the-asean-australia-new-zealand-fta">ASEAN+ treaty</a>. </p>
<p>Provisions in such treaties allow foreign investors to seek compensation from Australia for <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2767996">acts of expropriation</a>. </p>
<h2>Foreigners get extra rights</h2>
<p>They cover not only direct expropriation – where the government acquires property – as do <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2802450">similar provisions</a> in the Australian Constitution, but also indirect expropriation, where a government prevents an investor from exercising property rights. </p>
<p>Australia has only once squarely faced the use of such provisions, after the High Court dismissed a challenge to its 2010 tobacco plain packaging legislation.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Philip Morris Asia’s use of a Hong Kong treaty was found to be an abuse of process.</span>
</figcaption>
</figure>
<p>Philip Morris Asia, a Hong Kong based company which took control of Philip Morris trademarks when Australia was preparing its plain packaging legislation, used a Hong Kong-Australia investment treaty to claim <a href="https://www.italaw.com/sites/default/files/case-documents/italaw7303_0.pdf">US$4.16 billion</a> for indirect expropriation.</p>
<p>The arbitration tribunal dismissed that claim as an “<a href="https://www.italaw.com/sites/default/files/case-documents/italaw7303_0.pdf">abuse of process</a>” under customary international law. </p>
<p>Philip Morris Asia was found to have obtained control of the trademarks in order to gain investment treaty protection when the dispute was foreseeable. </p>
<p>The <a href="https://www.dfat.gov.au/trade/agreements/in-force/safta/Pages/singapore-australia-fta">Singapore-Australia Free Trade Agreement</a> further commits Australia to providing the “customary international law minimum standard of treatment to foreigners”. </p>
<p>This “includes the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world”.</p>
<p>Why promise additional rights to foreign investors? </p>
<p>Because domestic law may not meet international standards. The extension of such rights can encourage domestic investors press for better local standards. </p>
<p>Offering the global standard can also encourage more <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2824090">foreign direct investment</a>.</p>
<h2>Palmer might face problems…</h2>
<p>If Mineralogy International does try to file an investor state dispute claim, it will have to establish that its investment is covered and that it is a foreign investor for the purpose of the treaty.</p>
<p>Australia might invoke a “denial of benefits” provision if Mineralogy International lacks substantial business activities in Singapore. </p>
<p>It might also allege “forum shopping” of the kind Philip Morris Asia was <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2842065">found to have engaged in</a>. </p>
<h2>…but those rights are important</h2>
<p>This is how international law is supposed to work. As with human rights treaties, nations consent to international standards. </p>
<p>Impartial investor state dispute settlement procedures make a national commitments to investors credible. Exceptions acknowledge abuses of process.</p>
<p>If provisions generate problems, such as <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3227401">costs and delays</a>, Australia can negotiate improvements and review and modernise old treaties. </p>
<p>It did that with the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3548358">Hong Kong Australia treaty</a> after the Philip Morris case and it has <a href="https://www.dfat.gov.au/trade-and-investment/discussion-paper-review-australias-bilateral-investment-treaties">just committed</a> to do it with the remaining older treaties.</p>
<p>An innovative way forward would be adding compulsory mediation before arbitration, as with the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3548358">Australia-Indonesia Free Trade Agreement</a> signed last year.</p><img src="https://counter.theconversation.com/content/145334/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Nottage received funding from the Australian Research Council over 2014-8 for a joint interdisciplinary Discovery Project examining Australia's investment treaties and dispute management in Asia-Pacific context (DP140102526). He was also a non-resident Fellow at the Centre for International Governance Innovation in Canada over 2016-7 for its book project on "Investor-State Arbitration Between Developed Democracies". </span></em></p>Foreign companies can get rights Australian companies can’t, so long as they are actually foreign.Luke Nottage, Professor, Sydney Law School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1441292020-08-17T14:09:27Z2020-08-17T14:09:27ZKenya-US free trade talks are under way: what Nairobi must get right from start<figure><img src="https://images.theconversation.com/files/352718/original/file-20200813-24-1jefizo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Donald Trump shakes hands with Kenyan President Uhuru Kenyatta during a bilateral meeting in the Oval Office of the White House in August 2018.
</span> <span class="attribution"><span class="source">Photo by Olivier Douliery-Pool/Getty Images</span></span></figcaption></figure><p>The United States and Kenya formally launched negotiations for a free trade agreement on 8 July 2020. With the US gearing up for presidential elections in a few months, these talks may not draw much global attention. But as <a href="https://www.csis.org/analysis/going-solo-what-significance-us-kenya-free-trade-agreement">a prototype for evaluating the substance of future US-Africa trade</a> relations, a lot rides on Washington using this deal to make a bold statement of its commitment to effective North-South free trade agreements.</p>
<p>The US is the third most important destination for Kenyan exports after Uganda and Pakistan, <a href="https://oec.world/en/profile/country/ken">accounting for 8% of its total exports</a>. Kenya exported goods worth US$ 527 million in 2018, primarily apparels, coffee and nuts. Its imports were mainly commercial aeroplanes and other spacecraft, polymers and medicaments. Kenya has a slim trade surplus that the US will probably be keen to balance.</p>
<p>Washington has a penchant for using free trade agreements to signal the status of partner states as regional strategic allies. Such agreements with Morocco, South Korea, Colombia and Bahrain were all intended to signal much deeper strategic alliances beyond trade. </p>
<p>For the European Union and China the Kenyan agreement further signals America’s intent for commercial expansion and competition in Africa. The principal objective is to secure duty free access for American industrial, apparel and agricultural goods in Africa. Its all about making American exports competitive. </p>
<p>US trade officials have described the Kenyan deal as a <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/march/trump-administration-notifies-congress-intent-negotiate-trade-agreement-kenya">model</a> for other African free trade deals. Terming Kenya a “strategic partner, regional leader and commercial hub” <a href="https://ke.usembassy.gov/joint-statement-between-the-united-states-and-kenya-on-the-launch-of-negotiations-towards-a-free-trade-agreement/">statements</a>from both the US Trade Representative Robert Lighthizer and the US ambassador to Kenya Kyle McCarter highlight the seriousness with which Washington wants this deal done. </p>
<p>This vigour affirms President Trump’s strategy outlined by the 2018 US-Africa policy. But since the Kenyan deal is an <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/march/trump-administration-notifies-congress-intent-negotiate-trade-agreement-kenya">initiative </a> of President Trump, the palpable pressure to conclude agreement could be detrimental to Kenya’s interests. The pressure hampers Kenya more given the asymmetry of capacity between the two states. </p>
<p>Free trade agreements are protracted affairs which take more than a year to complete. The US-Morocco agreement, for instance, took 15 months. Talks with Peru (18 months) and Colombia (20 months) lasted even longer. The Kenya-EU economic partnership agreements took more than 10 years to conclude.</p>
<p>Additionally, there’s no guarantee that Trump will be in office come January 2021. For this reason, Kenya’s team in Washington should consider informally engaging the democrats in case the deal has to be concluded under President Biden.</p>
<h2>Kenya’s negotiating objectives</h2>
<p>It is my view that Kenya’s negotiations should be guided by four principal questions and objectives as follows: </p>
<ul>
<li><p>Does the proximity of the November election in the US unduly compromise the quality of negotiations? </p></li>
<li><p>What are the prospects for renewal of the <a href="https://agoa.info/about-agoa.html">African Growth and Opportunity Act (AGOA)</a> in 2025? If extended, would Kenyan exports not covered benefit from US tariff removal? </p></li>
<li><p>Can Kenyan negotiators defend against US pressure to liberalise industrial goods under the East African Community Sensitive List and </p></li>
<li><p>Can the US extend to Kenya the “qualified industrial zones” model to bolster US foreign direct investment in Kenya? </p></li>
</ul>
<p>From a political perspective, a trade agreement makes sense. It shields Kenya from the uncertainties over the extension of the African deal and the vicissitudes of political party changes in Washington. As a trade tool, the merits of a free trade agreement depend a lot on the extension (or not) of AGOA after 2025 under President Trump or Biden. </p>
<p>More principally, whether democrats or Republicans win in November, the extension of the Africa market access law will depend on the extent to which sub-Saharan Africa states will be regarded as important flashpoints for US-China commercial competition in Africa. </p>
<p>Trump is certainly more combative in wanting to nullify China’s huge commercial advantage in Africa. But a Biden presidency would be more receptive to the appeals of the <a href="https://agoa.info/news/article/15634-us-house-black-caucus-to-advocate-extension-of-agoa.html">US Congress Black Caucus which champions</a> the unilateral extension of AGOA. Because of the uncertainty about the whims of the US presidency, it is in Kenya’s interest to concurrently lobby US democrats on the importance of this deal in case of a Biden presidency. </p>
<p>If AGOA is not extended without a free trade agreement, Kenya’s three biggest exports to the US – <a href="https://oec.world/en/profile/country/ken">apparels, macadamia nuts and cut flowers</a> – would face duty increases of 5%, 0.5% and 4% respectively. This would undoubtedly negatively affect exports. </p>
<p>But if it is extended, and the US-Kenya agreement ratified by Congress, elimination of duties on Kenyan non-AGOA exports (mainly minerals) will not amount to much in terms of export enhancement.</p>
<h2>Jordanian model</h2>
<p>Constraints to Kenyan exports to the US are not primarily tariff based. From Kenya’s standpoint, therefore, these trade talks are less about tariff and trade, than they are about attracting foreign investment into Kenya. The most useful potential outcome will be the extent to which Kenya draws manufacturing foreign direct investment from the US and other states, into its economic processing zones. </p>
<p>To achieve this, Kenya should negotiate for liberal rules of origin requirements. Such rules should not unduly constrain investors to use only US or Kenyan inputs for Kenyan exports to qualify for the duty free entry into the US. A rules-of-origin threshold of no more than 30% value add should be the target. </p>
<p>As an investment vehicle, the Kenya US agreement should be modelled on the Jordanian “qualified industrial zones model” which increased bilateral trade between the two states <a href="https://jo.usembassy.gov/us-jordan-joint-committee-meets-in-amman-praises-7-5-percent-increase-in-jordanian-exports-to-the-united-states-in-2018/">tenfold since its inception in 2001</a>. </p>
<p>This model permits foreign owned companies situated in select export processing zones to qualify for duty free exports into the US market. With apparel as Kenya’s principal target export, the success of its negotiating dexterity will be judged on how well it integrates the inputs and outputs of its export processing zones. An agreement that considers all apparel exports “Kenyan” irrespective of ownership and input source for a reasonable duration should be the target.</p>
<p>Finally, the US will no doubt be keen on Kenya’s liberalisation of agriculture and services as part of its ambition to compete with the EU as preeminent agricultural exporters. Every country keeps a short list of goods that it is allowed to protect either for infant industry protection or security reasons. Kenya’s highly protected commodities include wheat, matches, rice and cement which can attract customs tariffs of up to 75% in the case of certain types of rice. </p>
<p>My view here is that Kenya should grant the US the same agricultural exports conditions as those granted to the EU under the <a href="https://www.tralac.org/news/article/13865-epa-test-of-unity-as-kenya-breaks-away.html">Economic Partnership Agreement</a>. But at the same time, it should defend the continued protection of the “industrial” goods in the sensitive list such as cement, natural gas and most importantly worn clothing. These should be protected for purposes of the modest infant industry already in existence in production of these products. But it could end protection for some agricultural products like wheat. </p>
<p>If properly negotiated the agreement has the potential to rapidly enhance Kenya’s foreign industrial investment and overall export volumes. To do so, Kenya must pay more attention to the role of this agreement as an investment attraction vehicle and not just a simple tariff centred ‘traditional’ pact.</p><img src="https://counter.theconversation.com/content/144129/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elijah N. Munyi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Kenya must pay more attention to the role of this agreement as an investment attraction vehicle and not just a simple tariff centred ‘traditional’ pact.Elijah N. Munyi, Assistant Professor of International Political Economy, United States International UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1366042020-04-23T03:52:53Z2020-04-23T03:52:53ZCorporations prepare to sue as pandemic reveals trade flaws<figure><img src="https://images.theconversation.com/files/329955/original/file-20200423-47815-1diq0cu.jpg?ixlib=rb-1.1.0&rect=48%2C101%2C2044%2C1178&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/@peterlaster">Pedro Lastra/Unsplash</a></span></figcaption></figure><p>Global companies are positioning themselves to use little-known rules in trade agreements such as the Comprehensive Progressive Trans-Pacific Partnership (<a href="https://theconversation.com/the-trans-pacific-partnership-is-back-experts-respond-87432">CPTPP</a>) to claim millions of dollars in compensation for restrictions imposed during the pandemic.</p>
<p>They and other companies have successfully lobbied for rules in the CPTPP and other bilateral and regional agreements that give them rights to bypass courts including Australia’s High Court and sue governments in extraterritorial tribunals for income they claim restrictions have cost them, using so-called Investor-State Dispute Settlement (ISDS) procedures.</p>
<p>Such provisions do not exist in the rules of the World Trade Organisation iteslf, which is the body formally charged with regulating global trade.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
</strong>
</em>
</p>
<hr>
<p>The Philip Morris tobacco company used such rules in a Hong Kong-Australia agreement to claim billions of dollars in compensation from Australian for plain packaging legislation. </p>
<p>Defeating this claim took Australia seven years and <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million in legal costs.</a></p>
<p>There have been <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">increasing numbers</a> of such cases against governments regulating to reduce carbon emissions and combat climate change.</p>
<p>An international arbitration <a href="https://www.acerislaw.com/the-covid-19-pandemic-and-investment-arbitration/">law firm </a> Aceris Law LLC has told its clients</p>
<blockquote>
<p>while the future remains uncertain, the response to the COVID-19 pandemic is likely to violate various protections provided in bilateral investment treaties and may bring rise to claims in the future by foreign investors</p>
</blockquote>
<p>An Australian law firm <a href="https://www.lexology.com/Events/Details/7930">Alston & Bird</a> is advertising an event called “The coming wave of COVID-19 arbitration – looking ahead”.</p>
<p>Legal scholars critical of ISDS say governments could face an <a href="https://www.iisd.org/library/investor-state-claims-amidst-covid-19">avalanche</a> of ISDS cases after the pandemic is over. </p>
<h2>ISDS clauses establish rights to sue</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Phillip Morris lost its case against Australia’s plain packs law in the High Court, then went to an extraterritorial tribunal.</span>
<span class="attribution"><span class="source">LUKAS COCH/AAP</span></span>
</figcaption>
</figure>
<p>Foreign investors could allege that governments are breaching the “direct expropriation” clauses of ISDS rules by appropriating private health and other assets for public use. </p>
<p>Lock down rules that affect profits could be interpreted as “indirect expropriation”.</p>
<p>The pandemic is also raising questions about other aspects of Australia’s trade agreements. </p>
<p>Despite pleas from the <a href="https://www.pc.gov.au/news-media/speeches/free-trade-agreements">Productivity Commission</a>, each is <a href="https://www.smh.com.au/opinion/trade-agreements-need-more-public-and-parliamentary-scrutiny-20150501-1mxqc9.html">negotiated in secret</a> without an <a href="https://www.smh.com.au/politics/federal/trade-minister-andrew-robb-criticised-for-seeking-tpp-ratification-without-independent-analysis-20160209-gmpmwf.html">independent evaluation </a>of its costs and benefits.</p>
<p>Often the agreements open up <a href="https://link.springer.com/chapter/10.1007%2F978-3-319-29215-1_6">essential services</a> including health, to private foreign investment, with only limited carve outs to allow regulation which can be wound back, but not widened, over time.</p>
<p>They have also allowed pharmaceutical companies to <a href="https://www.nytimes.com/2015/01/31/opinion/dont-trade-away-our-health.html">increase their 20-year monopoly on new medicines</a>, delaying the availability of cheaper medicines. </p>
<p>In the past month the realities of the pandemic have forced the Australian government to (at least temporarily) back away from this approach.</p>
<p>It has <a href="https://www.theguardian.com/australia-news/2020/mar/31/federal-government-pay-half-integrate-private-public-hospitals-covid-19-response">directed private hospitals</a> to treat pandemic patients.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/three-simple-things-australia-should-do-to-secure-access-to-treatments-vaccines-tests-and-devices-during-the-coronavirus-crisis-136052">Three simple things Australia should do to secure access to treatments, vaccines, tests and devices during the coronavirus crisis</a>
</strong>
</em>
</p>
<hr>
<p>It has assisted local firms to reestablish the capacity to manufacture equipment such as <a href="https://www.abc.net.au/news/2020-03-27/inside-australias-only-medical-mask-factory/12093864">facemasks</a>. </p>
<p>And it has <a href="https://www.smh.com.au/politics/federal/foreign-buyers-face-scrutiny-on-every-bid-after-sharemarket-slump-20200329-p54f1s.html">ramped up</a> screening of foreign investment by the Foreign Investment Review Board, in a way trade agreements would <a href="https://www.dfat.gov.au/trade/agreements/in-force/chafta/fact-sheets/Pages/chafta-outcomes-at-a-glance">normally prevent</a>.</p>
<p>Post-pandemic trade policies should reject both the extremes of recent agreements and the Trump and Hanson policies of building walls and a return to high tariffs.</p>
<h2>Post-pandemic, we should wind such clauses back</h2>
<p>Australia should also reject the trap of taking sides in the US-China trade wars.</p>
<p>Trade agreements should be negotiated openly in a system that takes account of the specific needs of developing countries.</p>
<p>They should reinforce internationally-agreed and fully-enforceable labour rights and environmental standards, allow countries such as Australia to maintain the manufacturing capacity that will be needed in the event of crises and enable governments to regulate for purposes of public health and the environment. </p>
<p>They most certainly should not strengthen medicine or other monopolies, or give additional legal rights such as ISDS to global corporations that already have enormous market power.</p><img src="https://counter.theconversation.com/content/136604/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is the Convener of the Australian Fair Trade and Investment Network of community groups which advocates for fair trade based on human rights, labour rights and environmental sustainability.</span></em></p>Investor State Dispute Settlement Procedures open the prospect of legal cases it would cost Australia millions to defend.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1214052019-08-05T12:57:51Z2019-08-05T12:57:51ZWill Trump’s trade war with China ever end?<p>President Donald Trump recently escalated his trade war with China, threatening to impose a 10% tariff on the <a href="https://www.bbc.com/news/business-49199559">remaining US$300 billion</a> of untaxed Chinese imports.</p>
<p>If the new tariff goes into effect in September as promised, <a href="https://www.bloomberg.com/news/articles/2019-08-01/trump-ratchets-up-trade-war-with-new-tariffs-on-chinese-imports?srnd=premium">virtually all Chinese exports</a> to the U.S. would be subject to levies ranging from 10% to 25%. <a href="https://www.bloomberg.com/news/articles/2019-08-05/china-hits-back-at-trump-with-weaker-yuan-halt-on-crop-imports">China retaliated</a> by letting the value of its currency fall to the lowest level in more than a decade and halting all crop imports. </p>
<p>Many Americans like me are now wondering: Is there any end in sight?</p>
<h2>How to win an economic war</h2>
<p>As a <a href="https://shared.cas.gsu.edu/profile/charles-hankla-2-2/">scholar of trade policy</a>, I’ve repeatedly <a href="https://theconversation.com/economic-history-shows-why-trumps-america-first-tariff-policy-is-so-dangerous-92715">made the point</a> that free exchange is a <a href="https://www.thenewbarcelonapost.com/en/200-years-david-ricardo-principles-trade-and-distribution/">positive sum game</a> – meaning every participating country can benefit – rather than zero sum — as <a href="https://www.cnbc.com/video/2018/03/12/trump-thinks-trade-is-a-zero-sum-game-says-expert.html">Trump seems to believe</a>. This is why commercial disputes are certain to harm all participants. </p>
<p><a href="https://theconversation.com/trumps-go-it-alone-approach-to-china-trade-ignores-wtos-better-way-to-win-93918">I believe</a> that the United States could have avoided its current predicament by using the World Trade Organization’s existing <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">dispute resolution process</a> to address its justifiable concerns with Chinese behavior.</p>
<p>Still, from the perspective of a single country, starting a trade war could potentially be justified if the end result ultimately shifts the terms of trade in its favor. </p>
<p>Such a victory can only be achieved when the country has more <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674840317&content=reviews">bargaining leverage</a> than its opponent – in other words, when it can impose more pain on its adversary than it experiences itself. </p>
<p>And the longer the trade war continues, the more concessions that country will have to win in order to compensate for the damage caused.</p>
<p>So, after nearly 18 months of escalating disputes between the U.S. and China, where are we? Is either side winning, and can any concessions justify the <a href="https://thehill.com/opinion/finance/443255-us-china-trade-war-major-pain-little-gain">economic harm</a> that both sides have already experienced?</p>
<h2>China’s pain</h2>
<p>First and foremost, it has become increasingly clear that the trade war is hurting the economies <a href="https://www.bloomberg.com/opinion/articles/2019-08-01/trump-s-trade-war-has-hurt-both-the-u-s-and-china">of both countries</a>. Neither will emerge from this conflict unscathed. </p>
<p>Unfortunately, however, the last 18 months have done little to clarify who is winning – that is, who is hurting less and can credibly hold out for longer.</p>
<p>Take China. Before the trade war, it was already facing a number of significant challenges, first among them how to effect a transition from its current reliance on cheap manufacturing <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2018/05/03/what-is-made-in-china-2025-and-why-is-it-a-threat-to-trumps-trade-goals/?noredirect=on&utm_term=.ee3e3095db09">to the production of higher value-added goods</a>. China’s political stability is also somewhat precarious, as evidenced by recent events in <a href="https://www.cnn.com/asia/live-news/hong-kong-protest-mong-kok-intl-hnk/index.html">Hong Kong</a> and <a href="https://www.nytimes.com/2019/07/10/world/asia/china-xinjiang-rights.html">Xianjing</a>, as well as Chinese leader Xi Jinping’s <a href="https://www.nytimes.com/2018/03/07/world/asia/china-xi-jinping-party-term-limit.html">authoritarian crackdown</a>.</p>
<p>Moreover, China’s economic growth has slowed to a <a href="https://www.cnn.com/2019/07/15/economy/china-gdp-growth/index.html">27-year</a> low of 6.2%. And perhaps more ominously for the country, there are growing signs that foreign companies from America and elsewhere are <a href="https://www.forbes.com/sites/kenrapoza/2019/07/16/europe-joins-us-companies-moving-out-of-china/#24b2deb615bf">looking outside China</a> as they expand their sourcing, production and distribution activities.</p>
<p>Of course, China’s growth rate still makes it among the fastest-expanding economies in the world, so the recent slowdown can hardly be termed a crisis. And the shift away from China, limited as it is, began before the trade war, spurred on by <a href="https://www.economist.com/business/2011/06/09/the-end-of-cheap-goods">rising prices</a>, <a href="https://www.marketwatch.com/story/why-is-the-us-accusing-china-of-stealing-intellectual-property-2018-04-05">intellectual property theft</a> and other issues.</p>
<h2>Not necessarily America’s gain</h2>
<p>The problem for the U.S. is that Americans are also increasingly feeling the pinch.<br>
Perhaps most notably, farmers – many of whom continue to <a href="https://www.cnbc.com/2019/05/19/farmers-are-hurting-but-they-still-support-trump-and-his-trade-war-for-now.html">support Trump</a> – are <a href="https://www.msn.com/en-us/money/markets/farmers-are-losing-patience-with-trumps-trade-war/ar-AABv8iG">beginning to tire</a> of the sacrifices they are making for his uncompromising positions. With the Chinese government <a href="https://www.bloomberg.com/news/articles/2019-08-02/china-s-trump-retaliation-options-range-from-soybeans-to-boeing">threatening to retaliate</a> if Trump follows through on the new tariffs, their willingness to go along may be even more sorely tested.</p>
<p>To keep agriculture on its side, the Trump administration has channeled <a href="https://www.washingtonpost.com/politics/2019/08/01/nine-in-counties-that-voted-trump-have-received-subsidies-fight-trade-war/?utm_term=.f8e22f004d13">billions of dollars in subsidies</a> to those hurt by his trade policies. But this approach also has its political costs, with more fiscally conservative backers of the president <a href="https://time.com/5347827/republicans-fume-at-president-trumps-12-billion-plan-to-aid-farmers/">balking at the price tag</a>.</p>
<p>From a broader perspective, recent studies have undercut <a href="https://www.whitehouse.gov/briefings-statements/remarks-president-trump-marine-one-departure-56/">Trump’s claim</a> that Chinese companies are bearing the brunt of the tariff payments, showing that the <a href="https://www.nber.org/papers/w25672.pdf">bulk of costs</a> are passed to U.S. companies and consumers. And the stock market is <a href="https://www.nytimes.com/2019/08/02/business/economy/china-us-trade-threats.html">reacting negatively</a> to the latest Trump threats.</p>
<p>It is true that the overall American economy remains strong, with <a href="https://www.wsj.com/articles/u-s-july-nonfarm-payrolls-grew-by-164-000-11564749103">expanding employment</a> and a fast, though slowing, <a href="https://www.npr.org/2019/07/26/745547982/the-u-s-economy-is-slowing-as-trade-war-takes-a-toll">growth rate</a> of 2.1% in the most recent period. But China has one more strategic advantage that could make a substantial difference: It can wait out Trump’s presidency. </p>
<p>If the Trump administration’s approach to trade represented a <a href="https://www.politico.com/magazine/story/2017/01/yes-a-bipartisan-foreign-policy-is-possibleeven-now-214617">bipartisan consensus</a>, the U.S. could keep up the pressure over the long term. Containment policy during the Cold War, in which the United States committed itself to curbing Soviet influence, represents the <a href="https://www.hoover.org/research/orienting-principle-foreign-policy">classic example of a consensus</a> that was credibly maintained, in one form or another, across several administrations.</p>
<p>But because the tariffs are so associated with Trump’s personality, the Chinese government can <a href="https://www.cnbc.com/2019/08/02/china-has-can-hold-out-longer-than-the-us-in-the-trade-war-expert.html">afford to wait</a> for a new president. If a Democrat wins in 2020, he or she will <a href="https://www.vox.com/policy-and-politics/2019/2/18/18215442/2020-democratic-presidential-candidates-policies-trade">likely maintain</a> a harder line on China than we saw before Trump, but will <a href="https://www.bloomberg.com/news/articles/2019-07-31/democratic-candidates-target-bungled-trump-trade-war-in-debate">probably repudiate</a> the current president’s penchant for punitive and precipitous tariffs. </p>
<p>In a sense, America’s negotiating credibility has become yet another casualty of its polarized politics. </p>
<h2>In other words: No end in sight</h2>
<p>In the final analysis, China may have the most to lose from the ongoing dispute. But the U.S. bargaining position is more politically vulnerable. </p>
<p>And the Chinese can credibly claim that buckling under American pressure would be <a href="https://www.nytimes.com/2019/05/14/world/asia/china-propaganda-trade.html">unacceptable to their domestic audience</a>. </p>
<p><a href="https://www.jstor.org/stable/3687811?seq=1#page_scan_tab_contents">Studies of shooting wars</a> indicate that they tend to continue until events on the ground reveal which side is likely to win. The same is surely true for trade wars. </p>
<p>Since neither side is clearly winning or losing, we have probably not seen the end of this conflict.</p>
<p>[ <em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/121405/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump’s endgame for the US-China trade war still seems elusive as the conflict continues to escalate.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/950282018-04-18T10:43:54Z2018-04-18T10:43:54ZWhat is the TPP and can the US get back in?<figure><img src="https://images.theconversation.com/files/214853/original/file-20180414-46652-1qh5yl8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Is there still room for the U.S.? </span> <span class="attribution"><span class="source">AP Photo/Esteban Felix</span></span></figcaption></figure><p>President Donald Trump recently said he was open to returning to the <a href="https://theconversation.com/trans-pacific-partnership-piles-up-challenges-for-democracy-32815">Trans-Pacific Partnership</a>, but only if he could get a “substantially better” deal than his predecessor.</p>
<p>This apparent change of heart, <a href="https://twitter.com/realDonaldTrump/status/984631073865953280">announced via Twitter</a>, caught most observers off guard. The TPP was on track to become the <a href="https://www.weforum.org/agenda/2016/05/world-free-trade-areas-everything-you-need-to-know/">world’s largest free trade zone</a> by joining <a href="https://www.investopedia.com/terms/p/pacific-rim.asp">Pacific Rim</a> countries that collectively produce about <a href="http://www.bbc.com/news/business-32498715">40 percent of global economic output</a>. But Trump railed against the accord on the campaign trail, making it the ultimate bugbear for his brand of economic nationalism. In a widely anticipated move, he <a href="https://theconversation.com/can-the-trans-pacific-partnership-survive-after-trump-71821">withdrew the U.S.</a> from the TPP as one of his first presidential acts.</p>
<p>If Trump ever officially <a href="https://www.cnbc.com/video/2018/04/13/president-trump-reconsiders-tpp.html">changed his tune</a> and tried to rejoin this trade pact, could he? </p>
<p>Like <a href="http://thehill.com/opinion/finance/383383-even-if-trump-wants-to-rejoin-tpp-that-ship-may-have-sailed">many observers</a>, I believe it would be tough to pull off. The other 11 countries would clearly prefer to have the U.S. in rather than out, but <a href="http://money.cnn.com/2018/04/13/news/economy/us-tpp-trade-trump/index.html">they are understandably reluctant</a> to throw open, for a third time, negotiations that took years to conclude. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"984631073865953280"}"></div></p>
<h2>Backstory</h2>
<p>In 2008, most of the major Pacific Rim economies – with the notable exception of China – <a href="http://as.ucpress.edu/content/ucpas/56/6/1017.full.pdf">began to consider</a> a massive free trade agreement for the region.</p>
<p>Formal TPP talks finally began <a href="https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/round-1-melbourne">two years later</a>, when representatives of the U.S. and several other Pacific nations, such as Australia, Chile and Vietnam, started to hammer out the pact’s contentious details. </p>
<p>The deal, which took another <a href="https://ballotpedia.org/The_Trans-Pacific_Partnership_trade_deal:_An_overview">six years</a> to complete, later expanded to include more countries – including Japan, Canada and Mexico.</p>
<p>The <a href="http://www.bbc.com/news/business-32498715">aim of the TPP</a> was to deepen economic ties between the dozen countries, slash tariffs on a broad range of goods and services, and better synchronize their policies and regulations. The <a href="https://theconversation.com/tpps-new-battle-lines-may-pose-threat-to-worlds-biggest-trade-deal-48802">substance of the agreement</a> was complex, and different countries negotiated different grace periods for its implementation. </p>
<p>TPP proponents <a href="https://scholar.google.com/citations?user=Y58-EhUAAAAJ&hl=en&oi=ao">like me</a> based our <a href="https://theconversation.com/does-tpps-slow-death-mean-the-world-is-now-unsafe-for-trade-deals-64577">support</a> on <a href="http://econ.tu.ac.th/archan/Chayunt/Site/EE451_files/03Neoclassic.pdf">well-established economic theories</a>, which point to the benefits of barrier-free trade for all participating countries. These theories do not deny, of course, that some industries and workers can suffer significantly from open exchange. But they emphasize the overall advantages of freer trade in generating new jobs, cheaper products and more innovation.</p>
<p>Another argument in favor of the accord was <a href="https://theconversation.com/how-the-tpps-demise-threatens-us-national-security-and-pax-americana-67514">more geopolitical</a>, considering the TPP as a <a href="https://theconversation.com/is-tpp-about-jobs-or-china-42296">bulwark against China</a> – which was <a href="https://www.cnn.com/2017/01/23/opinions/killing-ttp-great-for-china-bergstrand-opinion/index.html">never slated to join</a>. </p>
<p>Despite its potential benefits, however, the emerging partnership soon became a lightning rod for U.S. opponents of open markets. </p>
<h2>Objections</h2>
<p>The critics lodged three distinct complaints. They expressed skepticism for the benefits of free trade itself, arguing that imports can <a href="https://theconversation.com/is-trump-right-that-the-tpp-will-destroy-millions-of-jobs-and-cede-us-sovereignty-62085">destroy industries</a>, uproot communities and threaten national security. They also argued that international agreements <a href="https://theconversation.com/trans-pacific-partnership-piles-up-challenges-for-democracy-32815">undermine democracy</a> and objected to the <a href="https://www.cnn.com/2015/06/11/politics/trade-deal-secrecy-tpp/index.html">secrecy of the negotiations</a> themselves. </p>
<p>Finally, opponents homed in on the pact’s specific details, especially those that were leaked or released early on. The most controversial issues proved to be indirectly related to trade policy.</p>
<p>TPP foes, for example, lambasted provisions regarding <a href="https://www.citizen.org/article/news-intellectual-property-table">intellectual property</a>, <a href="https://www.vox.com/cards/trans-pacific-partnership/will-the-tpp-protect-labor-rights">labor</a> and the <a href="https://news.nationalgeographic.com/2015/11/151105-TPP-free-trade-wildlife-trafficking-conservation-cites/">environment</a>. Some critics argued that these rules went too far, while others complained that they didn’t go far enough.</p>
<p>Many of them also <a href="https://theconversation.com/investor-rights-to-sue-governments-pose-real-dangers-40004">vehemently opposed</a> its <a href="https://theconversation.com/tpp-trade-pact-still-needs-improvements-to-protect-governments-from-foreign-suits-54078">investor-state dispute settlement provisions</a>, which would have let foreign businesses sue member governments for any violations that they claimed were hurting their interests.</p>
<p>Despite this opposition in the U.S and elsewhere, the 12 nations ultimately signed the TPP in February 2016 and began the process of domestic ratification. But Trump was elected later that year, and he backed out of the deal as soon as he entered the White House. </p>
<p>Most observers expected America’s exit to doom the agreement. Instead, the 11 remaining signatories <a href="https://theconversation.com/farmers-and-services-industry-the-winners-under-the-revised-trans-pacific-partnership-trade-deal-90619">forged a smaller pact</a> <a href="https://www.reuters.com/article/us-trade-tpp/asia-pacific-nations-sign-sweeping-trade-deal-without-u-s-idUSKCN1GK0JM">among themselves</a>, renamed the <a href="https://www.csis.org/analysis/tpp-cptpp">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a> and signed in March 2018. Lawmakers in the countries taking part are now considering ratification.</p>
<h2>Another flip-flop</h2>
<p>Besides, this bout of Trump’s apparent openness to join the TPP seemed to be short-lived. It may have ended as it started, on Twitter. The pact would have “too many contingencies and no way to get out if it doesn’t work,” Trump said in a tweet that mischaracterized South Korea as a member. (It isn’t.)</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"986436520444866560"}"></div></p>
<p>Perhaps Trump realized that the U.S. would probably have to accept terms that are no better – and possibly worse – than those President Barack Obama agreed upon in 2016 when the TPP talks ended.</p><img src="https://counter.theconversation.com/content/95028/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump, who withdrew the US from the Trans-Pacific Partnership when he became president, briefly appeared to consider joining the trade accord again.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/928012018-03-05T11:44:47Z2018-03-05T11:44:47Z‘Trade wars are good’? 3 past conflicts tell a very different story<figure><img src="https://images.theconversation.com/files/213233/original/file-20180404-189821-w997ax.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There's a reason investors don't like trade wars.</span> <span class="attribution"><span class="source">AP Photo/Mark Schiefelbein</span></span></figcaption></figure><p>A bilateral trade war appears to be in full swing. </p>
<p><a href="https://www.cnbc.com/2018/04/04/china-new-us-tariffs-including-soy-cars-and-chemicals.html">China</a> and the <a href="https://www.washingtonpost.com/business/economy/trump-administration-targets-chinese-electronics-aerospace-and-machinery-goods-with-50-billion-in-tariffs/2018/04/03/9be42e5e-3786-11e8-9c0a-85d477d9a226_story.html">U.S.</a> are trading targeted tariffs on each others’ goods. <a href="https://www.nytimes.com/2018/03/02/business/europe-steel-tariffs-trump.html">Threats</a> of <a href="https://www.nytimes.com/2018/03/02/us/politics/trump-tariffs-steel-aluminum.html">retaliation</a> by key U.S. allies like Canada and the European Union prompted President Donald Trump <a href="http://money.cnn.com/2018/03/22/news/economy/steel-aluminum-tariff-exemptions/index.html">to exempt a large group of countries</a> from the steel and aluminum duties it <a href="https://www.nytimes.com/2018/03/01/business/trump-tariffs.html">announced</a> last month, which means they will likely hit China hardest. </p>
<p>The president himself doesn’t seem to mind. He recently tweeted that “trade wars are good.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"969525362580484098"}"></div></p>
<p>But what exactly is a trade war and what are its consequences?</p>
<p>As a <a href="http://www.cambridge.org/us/academic/subjects/history/economic-history/conspiracy-free-trade-anglo-american-struggle-over-empire-and-economic-globalisation-18461896?format=HB">historian of trade</a>, I thought it would be worth recalling some illuminating examples, each of which led to disastrous results. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=327&fit=crop&dpr=1 600w, https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=327&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=327&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=411&fit=crop&dpr=1 754w, https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=411&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/208821/original/file-20180304-65547-1uhc991.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=411&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tariffs on foreign steel were the first salvo in the president’s trade war.</span>
<span class="attribution"><span class="source">AP Photo/Martin Meissner</span></span>
</figcaption>
</figure>
<h2>France and Italy go to ‘war’</h2>
<p>Soon after Italy’s unification in 1871, the young nation turned to protectionism to foster its “infant” industries, whereupon it terminated its trade agreement with France in 1886. </p>
<p>Italy raised tariffs as high as 60 percent to protect its industries from French competition. The French government responded by refusing to negotiate and instead threatened the Italians with punitive tariffs if Italy did not lower its own. </p>
<p>Tariff retaliation followed tariff retaliation. In France, this resulted in the <a href="http://journals.cambridge.org/action/displayFulltext?type=1&fid=2894044&jid=ISH&volumeId=37&issueId=02&aid=2894036">passage</a> of the highly protectionist <a href="https://en.wikipedia.org/wiki/M%C3%A9line_tariff">Méline Tariff</a> of 1892, which famously signaled the death knell of the country’s flirtation with free trade. </p>
<p>Both nations <a href="https://books.google.co.uk/books?id=lrHwzh1eXNQC&pg=PA63&lpg=PA63&dq=franco-italian+trade+war&source=bl&ots=CMciFzxXCy&sig=2uTzmNeNQKlKiea76WFW9WcJLyU&hl=en&sa=X&ved=0ahUKEwiPgM7Pt8zLAhUITBQKHXFICHYQ6AEILDAD#v=onepage&q&f=false">felt the costs</a> of the trade war, but the damage extended more widely. Franco-Italian trade fell drastically, followed by dislocations in countries where they got supplies. </p>
<p>Another unintended result was that it pushed Italy closer to Germany and Austria-Hungary in the years leading up to the First World War. </p>
<h2>The GOP takes on the Canadians</h2>
<p>Although the GOP has in recent times <a href="https://www.denverpost.com/2017/01/20/donald-trump-leadership-shift/">called itself</a> the “party of free trade” – before Trump anyway – it wasn’t always thus. In the years following the U.S. Civil War, for example, when Republicans dominated the presidency, it was the proud <a href="https://theconversation.com/trumps-anti-trade-tirades-recall-gops-protectionist-past-54631">party of protectionism</a> and took efforts to solidify its economic nationalist platform. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=867&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=867&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=867&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1090&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1090&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115909/original/image-20160321-30917-191lx5o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1090&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">This 1891 Canadian cartoon suggests a policy of tariff retaliation against the U.S. aiding Canadian agriculture and industry.</span>
<span class="attribution"><span class="source">The Industrial League for Free Distribution</span></span>
</figcaption>
</figure>
<p>The U.S. abrogated its reciprocity treaty with Canada in 1866, following which Canadian economic nationalists sought to pay their southern neighbor back “<a href="https://www.academia.edu/292177/Protection_Federation_and_Union_The_Global_Impact_of_the_McKinley_Tariff_upon_the_British_Empire_1890-1894_Journal_of_Imperial_and_Commonwealth_History_">in their own coin</a>” – that is, through tariff retaliation. </p>
<p>By 1879, Canadian Conservatives consolidated around their own national policy of protectionism. Some American companies – Singer Manufacturing, American Tobacco, Westinghouse and International Harvester – <a href="http://www.historyandpolicy.org/opinion-articles/articles/the-protectionist-side-of-outsourcing">decided to move their production to Canada</a> rather than pay the high import taxes. By the late 1880s, 65 U.S. manufacturing plants had relocated to Canada. In this case, far from halting outsourcing, protectionism caused it.</p>
<p>Trade tensions reached a breaking point in 1890. Republicans, in charge of the executive and the legislative branches, passed the highly protectionist McKinley Tariff. Agricultural exports to Canada fell by half from 1889 to 1892.</p>
<p>And when the Republicans passed the even more protectionist Dingley Tariff in 1897, Canada <a href="https://books.google.co.uk/books?id=yB49AAAAIAAJ&pg=PA652&lpg=PA652&dq=canadian+preferential+tariff+1897&source=bl&ots=j9sW5VtVSo&sig=cGrBD5YHlHTkMWx67974I1se8Ak&hl=en&sa=X&ved=0ahUKEwidu5ORzczLAhUEwBQKHWX0ASgQ6AEIHTAA#v=onepage&q&f=false">decided</a> that the best response was a double dose of tariff retaliation and closer trade ties with the British empire rather than the United States. </p>
<p>It thereafter took nearly a century for free trade between the U.S. and Canada to develop. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=506&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=506&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=506&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=635&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=635&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115914/original/image-20160321-30949-1gsaa71.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=635&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The fight between free traders and protectionists has been going on for a long time.</span>
<span class="attribution"><span class="source">Montreal Weekly Witness</span></span>
</figcaption>
</figure>
<h2>Smoot-Hawley wars and the age of protectionism</h2>
<p>Trade wars were by no means unique to the late 19th century. Far from it. </p>
<p>The trade wars that followed the Republican passage of the protectionist <a href="https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp">Smoot-Hawley Tariff Act of 1930</a>, which <a href="http://www.economist.com/node/12798595">raised duties on hundreds of imports</a>, similarly contain illustrative <a href="https://books.google.co.uk/books?id=u0pSGAY-YzEC&printsec=frontcover&dq=trade+wars&hl=en&sa=X&ved=0ahUKEwjf6Yv6uMzLAhVMVRoKHVtcCSE4KBDoAQgvMAQ#v=onepage&q&f=false">lessons for today</a>. Canada responded with tariff increases of its own, for example, as did Europe. </p>
<p>In a widely cited <a href="http://www.upenn.edu/pennpress/book/979.html">study</a> from 1934, political economist Joseph M. Jones Jr. explored Europe’s retaliation. His study provided a warning about the trade wars that can arise when a single nation’s tariff policy “threatens with ruin” specialized industries in other countries, arousing “bitterness” throughout their populations. </p>
<p>To provide but one example from Jones’ study, the Italian public responded violently to the Smoot-Hawley Tariff. American-made cars were attacked and befouled on the streets of Italy. And in June 1930, Benito Mussolini vowed that “Italy will defend herself in her own way.” Tariff duties were increased on U.S. goods, and total U.S. exports to Italy plunged from US$211 million in 1928 to $58 million in 1932.</p>
<p>An indignant Italy added insult to injury by signing a commercial treaty with Soviet Russia in August 1930, followed by a nonaggression pact two years later.</p>
<p>More broadly, economist Douglas Irwin <a href="https://books.google.co.uk/books?id=MIDsnT3Ze0YC&printsec=frontcover&dq=douglas+irwin&hl=en&sa=X&ved=0ahUKEwje9-ituczLAhXDqxoKHSrRAAYQ6AEILzAD#v=onepage&q&f=false">notes</a> how the 1930 tariff “was very damaging from the standpoint of U.S. commerce” because it sparked tit-for-tat trade discrimination against the U.S. and “diverted existing trade away.”</p>
<p>Economist and New York Times columnist Paul Krugman has similarly <a href="http://krugman.blogs.nytimes.com/2009/11/30/protectionism-and-the-great-depression/?_r=0">reminded</a> us that, although the Smoot-Hawley Tariff did not cause the Great Depression, the resulting international trade wars played a critical part “in preventing a recovery in trade when production recovered.”</p>
<p><em>This article was updated on April 4 with new tariff details.</em></p><img src="https://counter.theconversation.com/content/92801/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc-William Palen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>President Trump says ‘trade wars are good,’ but history tells a very different story.Marc-William Palen, Lecturer in History, University of ExeterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/911902018-02-21T11:44:30Z2018-02-21T11:44:30ZTrump’s protectionism continues long history of US rejection of free trade<figure><img src="https://images.theconversation.com/files/207181/original/file-20180220-116337-1hsj6v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump has made pushing protectionism since the campaign.</span> <span class="attribution"><span class="source">AP Photo/Chris Carlson</span></span></figcaption></figure><p>Free traders have vilified President <a href="https://economictimes.indiatimes.com/news/economy/policy/india-china-slam-trumps-protectionist-policies/articleshow/61934837.cms">Donald Trump</a> as a pernicious protectionist because of policies such as hiking <a href="https://www.cbsnews.com/news/germany-trump-tariffs-could-trigger-trade-war/">tariffs</a>, abandoning the <a href="https://www.politico.com/magazine/story/2017/03/trump-tpp-free-trade-deal-obama-renegotiate-nafta-214874">Trans-Pacific Partnership</a> and saying he’s prepared to walk away from the <a href="https://www.reuters.com/article/us-usa-trump-nafta-exclusive/exclusive-trump-says-terminating-nafta-would-yield-the-best-deal-in-renegotiations-idUSKBN1F703Y">North American Free Trade Agreement</a>. </p>
<p>They fear his policies will hurt the U.S. economy by restricting access to foreign goods. But are these policies really so radically different from past administrations? </p>
<p>Absolutely not. The fact is the U.S. has never been a truly free trade country – one with virtually no barriers to trade with other nations – <a href="https://www.worldfinance.com/infrastructure-investment/government-policy/once-the-champion-of-free-trade-the-us-is-now-taking-a-protectionist-stance">as some people seem to think</a>. The idea that the U.S. ever was is a myth. </p>
<p>This is among the topics I’ve been exploring for an upcoming book, titled “The Rise of the Guardian State.” My research shows the reason both Republicans and Democrats <a href="https://theconversation.com/free-trade-is-once-again-tearing-apart-the-republican-party-57698">have pursued protectionist policies</a> – despite their rhetoric – is part of the fabric of the American democratic political process. </p>
<h2>The ‘guardian state’</h2>
<p>Long before the U.S. became the so-called <a href="https://www.worldfinance.com/infrastructure-investment/government-policy/once-the-champion-of-free-trade-the-us-is-now-taking-a-protectionist-stance">defender of the liberal economic world order after World War II</a>, it had become a guardian of another kind. </p>
<p>U.S. policymakers’ free trade rhetoric has always been tempered by what I call a “guardian” mentality intended to shelter domestic industries and workers from the full impact of globalization and open trade. In other words, the U.S. government tends to talk a lot about free trade but then maintains a protective layer of trade barriers across the economic landscape. </p>
<p>A <a href="https://works.bepress.com/giulio_gallarotti/18/">paper I published</a> in 2000 showed how this is a natural outgrowth of democracy and the granting of suffrage to more people. As the masses gained greater political power at the turn of the 19th century, politicians faced greater pressure to protect their constituents from the vicissitudes of trade.</p>
<p>For example, at the ballot box, the issues of economic growth and unemployment have often been critical to outcomes. In fact, in every presidential election since World War II, economic issues have figured prominently if not centrally.<br>
And on a broader level, special interests such as unions and business groups brought their political weight to bear at the doors of lawmakers to protect their members. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207168/original/file-20180220-116360-lfl5j4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trade representatives from Canada, the U.S. and Mexico discuss ongoing negotiations over NAFTA.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<h2>An axis of guarded trade</h2>
<p>Hence what we have perceived as a partisan <a href="https://classroom.synonym.com/major-difference-opinions-between-democrats-republicans-7724.html">schizophrenia in trade policy</a> in American history between the so-called Republican free traders and Democratic economic nationalists has usually been nothing more than moderate shifts back and forth along an axis of guarded trade. </p>
<p>Even the pro-free trade Republican administrations of Presidents Ronald Reagan and George W. Bush promoted <a href="https://www.brookings.edu/wp-content/uploads/1987/01/1987a_bpea_crandall.pdf">significant barriers</a> to trade. For example, Reagan <a href="http://www.politifact.com/truth-o-meter/article/2016/jul/01/donald-trump-cites-ronald-reagan-protectionist-her/">pushed Japan</a> to unilaterally limit the number of automobiles it exported to the U.S., while Bush <a href="http://www.businessinsider.com/bush-steel-tariff-impact-2017-7">erected tariffs against foreign steel</a>.</p>
<p>And in the 2016 presidential election, there was scant fundamental difference between the two main candidates’ trade policies. Both <a href="http://nationalinterest.org/feature/donald-trump-vs-hillary-clinton-the-trade-policy-paradox-18243">Hillary Clinton and Trump</a>, notwithstanding some minor differences on trade, questioned American support of multilateral trade agreements and engaged in worker-centric and populist rhetoric on globalization. </p>
<h2>Trade’s costs and benefits</h2>
<p>But if America could get very close to a free trade policy, would that be a good thing? </p>
<p>No major country has ever been a purely free trader in modern history. <a href="https://works.bepress.com/giulio_gallarotti/2/">My research</a> for an article published in 1985 demonstrates that Great Britain came closest from 1860 to World War I, when the country eliminated virtually all tariffs. </p>
<p>Among major nations in the post-World War II period, the U.S. has been closest to the free trade pole. But as noted above, with a <a href="https://www.cbp.gov/trade/quota/guide-import-goods/commodities">plethora of tariffs and quotas on foreign goods</a>, the U.S. is still some distance away from late 19th-century Britain’s free trading ways.</p>
<p>We know trade carries <a href="https://www.economicshelp.org/trade2/benefits_free_trade/">great benefits</a>, as is clear from the fact that the most prosperous nations today embrace trade as a vehicle to greater wealth. But trade concomitantly generates costs. </p>
<p>While the benefits of freer trade are spread over society as a whole in the form of rising real incomes and access to superior products, some localities experience costs that severely plague specific groups. The “destructive” part of “<a href="http://www.nytimes.com/2000/06/10/your-money/half-a-century-later-economists-creative-destruction-theory-is.html">creative destruction</a>” – coined by political economist Joseph Schumpeter to characterize capitalist competition – is synonymous with industries failing and their workers losing jobs. </p>
<p>While in theory such dislocation can be overcome over time by people migrating to more competitive industries and wealthier regions, in the short run it is devastating for families that are <a href="https://www.theatlantic.com/business/archive/2017/10/geographic-mobility-and-housing/542439/">less mobile</a> than others. And in fact people are far less mobile than liberal theorists like to contemplate (especially older blue-collar and unskilled workers). </p>
<p>Indeed an overwhelming amount of <a href="http://wer.worldeconomicsassociation.org/files/WEA-WER2-Schumacher.pdf">research</a> suggests that theories upon which free trade are based often fail quite significantly in the face of reality.</p>
<p>And that’s where protective barriers come in. They guard these groups from the economic dislocation of unrestricted competition across national boundaries. This renders a capitalist society more tolerable. </p>
<h2>‘Nothing in excess’</h2>
<p>That being said, going too far in a protectionist direction is surely as devastating, if not more so than a world of purely free trade. As in so many other dimensions of human life, the <a href="http://hellenicantidote.blogspot.com/2007/12/nothing-in-excess.html">famous Greek aphorism</a> “nothing in excess” rings true. </p>
<p>The present article is not an attempt to paint Trump as mainstream on trade policy in any way. Indeed, he has pursued a <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">very aggressive protectionist agenda</a>, even when measured against the most protectionist Democratic administrations. </p>
<p>But I do wish to suggest that the debate over trade in American history is not as bipolar as most believe and that the differences between Trump’s and past administrations are more a matter of degree than kind. </p>
<p>And if trade goes along the lines of Trump’s other political priorities, we may in fact see that U.S. trade practices will not change as significantly as many believe. His protectionist bark is likely <a href="https://www.salon.com/2017/03/30/president-trump-backtracks-on-trade-will-propose-only-moderate-changes-to-nafta/">bigger than his bite</a>.</p><img src="https://counter.theconversation.com/content/91190/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giulio Gallarotti does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The idea that the US is historically a free trading country is a myth. Here’s why that’s a good thing.Giulio Gallarotti, Professor of Government, Wesleyan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/873662017-11-14T12:26:21Z2017-11-14T12:26:21ZHow Africa can negotiate an effective continental free trade area agreement<figure><img src="https://images.theconversation.com/files/194420/original/file-20171113-27632-u0w5sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Large markets in Africa support the move for more trade in goods, services and assets.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>African countries are forging ahead to <a href="http://www.invest-nigeria.com/nigeria-begins-trade-negotiations-african-countries/">complete</a> negotiations for a continental free trade area between 55 countries by early next year. The idea, adopted by the African Union in 2012, is <a href="https://au.int/en/ti/cfta/about">to create</a> a single market which includes the free movement of goods, services and people. The integrated African market covers <a href="http://worldpopulationreview.com/continents/africa-population/">1.2 billion people</a> and a <a href="https://www.afdb.org/en/knowledge/publications/african-economic-outlook/">combined</a> GDP of over USD$3.5 trillion.</p>
<p>Large markets are <a href="https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AEO_2017_Report_Full_English.pdf">job-creating</a> as they support more trade in goods, services and assets. It is expected that a well designed agreement would help Africa boost industrial development, promote economic transformation and create new wealth. The benefits won’t be automatic but will require continuous national, regional and continental efforts. </p>
<p>Large regional markets are also essential for industrialisation. This is because they attract investment into firms that can diversify their product lines and stimulate the creation of related industries. This includes the supply of spare parts, distribution of goods and provision of advisory services. Some of these may start as their supplies but they may also grow into independent enterprises. </p>
<p>Viewed against the odds of success in getting 55 countries to foster meaningful regional integration, Africa has made commendable progress in crafting <a href="https://www.weforum.org/agenda/2016/07/globalization-as-we-know-it-has-failed-africa-has-an-alternative/">its own</a> creative approach. But reports from recent talks and a slowdown of regional integration efforts suggest a <a href="https://www.standardmedia.co.ke/business/article/2001259945/magufuli-s-costly-policies-that-are-killing-eac-dream">disturbing trend</a>. </p>
<p>Some government delegates are likely to seek to include protection for existing products and industries. This would be detrimental to the process if these lists ended up shaping the final agreement given the 2018 signing deadline. Such a retreat would run counter to recent advances in Africa’s trade integration efforts. In 2015 for example, three regional trading blocs, covering 650 million people in 26 countries, signed the landmark <a href="https://www.belfercenter.org/publication/benefits-africas-new-free-trade-area-0">Tripartite Free Trade Area</a> with a combined GDP of over USD$1.5 trillion. </p>
<h2>Agreement challenges</h2>
<p>The trade agreement nevertheless needs to be carefully thought out, particularly given that Africa is starting with a low <a href="https://www.afdb.org/en/knowledge/publications/african-economic-outlook/">intra-regional trade</a> of 15% compared to 19% in Latin America, 51% in Asia and 72% for Europe.</p>
<p>There is the risk that rushed negotiations could result in an agreement with too many exceptions to cover protected industries. This could include using non-tariff barriers – like safety measures – to protect local industries. A range of African countries use non-tariff barriers to curb imports of goods such as maize, milk, sugar, food oil products, and steel and iron.</p>
<p>Sensitive and excluded products – like sugar and dairy products – might in some cases cover up to 600 tariff lines (product codes used at the national level). But these exceptions should be used sparingly to enable domestic industries to access the larger regional and global markets needed for their growth. </p>
<p>In addition, the trade agreement needs to address the effects it may have on existing industries, environment, peace and security. It also needs to provide the policy space needed for governments to promote social policies such as job creation that could provide new performance standard for industries. Such policies should also balance between social goals and the need to be competitive on the global market.</p>
<p>Concerns over the expansion of foreign imports, rather than regional trade integration, also needs to be carefully assessed to avoid the free trade area becoming a conduit for imports. This could undermine Africa’s goals to increase its industrial and trade capacity. At present, nearly 85% of the goods traded in Africa come from outside the continent. Only 15% of the goods traded in Africa are produced locally, leading to an annual food import bill of over <a href="https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Africa_Progress_Report_2014.PDF">USD$35 billion</a>.</p>
<p>But the focus of the negotiations should not be the fear of imports. Rather the focus should be on scaling up export production in existing niche markets through the creation of new industries. Examples of growing industries include the supply of semi-processed processed foods that are turned into final products by importers. African firms such as the <a href="http://www.acfc.co.ke">Agro Chemical and Food Company in Kenya</a> are also producing speciality chemicals which are used in a variety of medical and manufacturing industries. </p>
<h2>Moving away from protectionism</h2>
<p>The alternative to protection is therefore market growth. This involves having deeper knowledge of markets through the collection of key information market, eliminating trade barriers, reducing subsidies and upgrading the quality of infrastructure. It also involves building capacity to manage the rules of origin of products to avoid illegal dumping of goods, customs and trade procedures and reporting and resolution of trade barriers. </p>
<p>The negotiations need to shift their focus from protectionism to greater regional trade integration. One way to do this is to set up a high-level <a href="https://www.tralac.org/news/article/12366-assessing-regional-integration-in-africa-viii-bringing-the-continental-free-trade-area-about.html">expert committee</a> or panel – drawn from government, private sector, academia and civil society – to include other relevant perspectives on issues such as infrastructure, technological capacity, and industrial growth. This would help to broaden discussions to reflect Africa’s current needs of trade as an instrument for economic transformation. </p>
<p>This committee would be guided by evidence-based research as well as by Africa’s own regional trade experiences. There are many examples that show how quickly Africa is learning about the risks of using bans and exemptions to restrict regional trade. For example, Zambia’s positive decision to reverse a ban on <a href="https://theconversation.com/why-african-countries-banning-imports-of-fruit-and-veg-is-a-blunt-tool-74624">fruit and vegetable imports</a>. </p>
<p>The committee would also need to draw on lessons from other regions of the world. As I set out in <a href="https://www.belfercenter.org/publication/new-research-african-regional-integration-science-technology-and-globalization-project">Emergent Africa: Evolution of Regional Integration</a>, Africa has a lot to learn from regional trade integration, especially the <a href="https://nuspress.nus.edu.sg/products/the-asean-miracle-a-catalyst-for-peace">Association of Southeast Asian Nations</a> .</p>
<p>The bloc’ approach to integration transcends the traditional focus on the free movement of goods. It includes measures <a href="https://www.unido.org/fileadmin/user_media_upgrade/Resources/Publications/UCO_Viet_Nam_Study_FINAL.pdf">such as</a> the creation of industrial parks to foster industrial development. The region also uses technology-based agreements covering key fields such as information and telecommunications technologies. This is particularly important because of the role of engineering and technology in all aspects of trade covering product design, production and distribution through international logistics chains. </p>
<h2>The future is open</h2>
<p>The challenges facing African trade negotiators are not easy. Africa’s regional integration efforts are the most complex ever undertaken. They are not just about emulating trading rules used in other regions of the world. They are about remaking the continent to create new networked interactions between sovereign states in a flexible way. This makes for a more open future with expanding possibilities to use regional trade integration to spread prosperity.</p>
<p><em>Dr Francis Mangeni, the Director of Trade, Customs and Monetary Affairs, with the Common Market for Eastern and Southern Africa (COMESA), contributed to this article. He is co-author with Calestous Juma of the <a href="https://www.belfercenter.org/publication/new-research-african-regional-integration-science-technology-and-globalization-project">forthcoming book</a>: Emergent Africa: Evolution of Regional Economic Integration</em></p><img src="https://counter.theconversation.com/content/87366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Calestous Juma does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Viewed against the odds of success in getting 55 countries to foster meaningful regional integration, Africa has made commendable progress in crafting its own creative approach.Calestous Juma, Professor of the Practice of International Development, Harvard Kennedy SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/781052017-05-29T06:39:34Z2017-05-29T06:39:34ZTrans Pacific Partnership to forge ahead without the US – at least for now<p>Free trade used to be a rallying cry for mainstream North American politicians. Back in the 1980s, Canada’s then prime minister, Brian Mulroney, campaigned successfully on the idea that <a href="https://books.google.com.hk/books?id=0Ol3Otvbuw0C&pg=PA413&lpg=PA413&dq=Brian+Mulroney,+%E2%80%9Cjobs,+jobs,+jobs%22&source=bl&ots=ZYi1_XjTbC&sig=2vKgUegwm2sm7JMpjKSvuc4ioS0&hl=en&sa=X&ved=0ahUKEwiD_JfE14XUAhWLpo8KHU5zDS8Q6AEINDAD#v=onepage&q=Brian%20Mulroney%2C%20%E2%80%9Cjobs%2C%20jobs%2C%20jobs%22&f=false">trade agreements</a> would <a href="https://www.socialism.com/drupal-6.8/articles/dateline-canada-proof-positive-nafta-kills-jobs">create</a> “<a href="http://www.cbc.ca/archives/entry/brian-mulroney-campaigning-for-a-parliamentary-seat-in-central-nova">jobs, jobs, jobs</a>”. </p>
<p>Today, such a slogan could well be political suicide. Indeed, during last year’s US presidential campaign, the only common ground among <a href="https://berniesanders.com/press-release/sanders-the-only-candidate-who-fought-job-killing-trade-deals/">Bernie Sanders</a>, <a href="https://www.theatlantic.com/politics/archive/2015/10/hillary-clinton-abandons-obama-on-trade/409546/">Hillary Clinton</a> and <a href="https://www.theatlantic.com/business/archive/2016/11/tpps-death-wont-help-the-american-middle-class/507683/">Donald Trump</a> was their contempt for the “<a href="https://berniesanders.com/candidates-must-take-a-firm-stand-on-the-job-killing-tpp-deal/">job killing</a>” Trans-Pacific Partnership (TPP) trade deal among American and Asian countries.</p>
<p>And within a few days of reaching office, President Trump <a href="http://www.businessinsider.com/sanders-mccain-trump-trans-pacific-partnership-2017-1">pulled the US out of the agreement</a>. But it now seems that news of the deal’s demise was premature. </p>
<p>At least for now, the 11 other countries party to the agreement – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – are <a href="http://www.bbc.com/news/39990686?ocid=global_bbccom_email_21052017_business">forging ahead</a>, even without the participation of the world’s largest economy.</p>
<h2>Understanding free trade</h2>
<p>Often lost in the fiery rhetoric about free trade agreements, such as the TPP, is their true economic benefit. Trade deals aren’t meant to be about jobs in this or that industry. They’re about raising a country’s overall productivity and prosperity.</p>
<p>In the short term, tariffs may seem beneficial as they allow less efficient homegrown companies to hire more and produce more. And, with free trade, <a href="http://www.imf.org/external/pubs/ft/fandd/basics/trade.htm">foreign competition dislodges local suppliers</a> and <a href="https://www.stlouisfed.org/on-the-economy/2015/june/how-international-trade-affects-the-us-labor-market">employment in certain industries falls</a>.</p>
<p>But what’s overlooked in these simple scenarios is the longer-term price of protectionism. While tariffs prop up some businesses, they <a href="http://www.jstor.org/stable/2006548?seq=1#page_scan_tab_contents">limit the international flow of resources</a> to most others.</p>
<p>Free trade, on the other hand, <a href="http://onlinelibrary.wiley.com/doi/10.1111/1468-0262.00467/full">bolsters productivity</a>. Once countries enter an agreement, resources naturally move around to the more efficient industries at home and abroad. </p>
<p>All countries tend to benefit from this shared increase in productivity – and, yes, from job creation in the long run.</p>
<p>Equally important, productivity usually rises for all countries in <a href="https://academic.oup.com/restud/article/75/1/295/1629450/Market-Size-Trade-and-Productivity">direct proportion to the size of the common market</a>. The larger the scope of the trade agreement and the more countries involved, <a href="https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp091906a">the better for everyone</a>. The reason is simple: an exporting industry now has access to many more markets, with the associated economies of scale reducing costs and increasing profits.</p>
<p>Without the US in the TPP, scale effects will certainly be much smaller. But the productivity effects of new markets remain attractive. Unless, that is, the US exit prompts TPP members to consider that agreement redundant because of the <a href="http://nationalinterest.org/feature/tpp-vs-rcep-america-china-battle-control-pacific-trade-14021">Regional Comprehensive Economic Partnership</a> (RCEP). </p>
<p>This partnership was first conceived as a regional trade agreement to enhance economic ties <a href="http://www.reuters.com/article/us-trade-tpp-rcep-idUSKCN0S500220151011">between the ten members of the Association of Southeast Asian Nations</a> (ASEAN): Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia. It then expanded to include China, Japan, South Korea, India, Australia and New Zealand. And <a href="https://www.pressreader.com/china/global-times/20161123/281487865946077">China has strongly backed the RCEP</a> since the TPP was announced.</p>
<p>Over time, the agreement’s design evolved to <a href="http://www.reuters.com/article/us-trade-tpp-rcep-idUSKCN0S500220151011">become an alternative</a> to the TPP, serving as a proxy for a political battle between the US and China. No more.</p>
<h2>Winners and losers</h2>
<p>Most TPP signatories are already part of the RCEP. That agreement comprises 16 countries and the TPP now has 11. Canada, Chile, Mexico and Peru belong to the TPP but not the RCEP. China, India and South Korea are in the RCEP but not the TPP. Meanwhile, China and South Korea are <a href="http://www.cnbc.com/2017/03/14/china-south-korea-join-tpp-members-in-trade-talks.html">having talks</a> with the other countries in the TPP.</p>
<p>For the Latin American countries, access to the Chinese and South Korean markets through the RCEP would be significant. After all, the US already has lower tariffs on average than emerging markets; Mexico and Canada are part of NAFTA; Chile has had an agreement with the US <a href="https://ustr.gov/trade-agreements/free-trade-agreements/chile-fta">since 2004</a>; and while Peru does not have an exclusive trade agreement with the US, it has had a promotion agreement to liberalise the services trade <a href="https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa">since 2009</a>. </p>
<p>Even with the US departure from the TPP, Canada, Chile, Mexico and Peru are well positioned for US trade through other agreements.</p>
<p>For the Asian countries, losing privileged access to the American market is certainly a blow, since geographical proximity and other economic ties already give them access to the Chinese and South Korean markets.</p>
<p>The reason trade agreements are not more plentiful is because <a href="https://theconversation.com/redesigning-nafta-is-not-a-bad-idea-if-workers-rather-than-vested-interests-win-76861">vested interests usually fight</a> tooth and nail to maintain their privileged position in local markets. Local companies tend to play the nationalist card – we create jobs! – and advance only a myopic view to convince politicians to abandon free trade deals. </p>
<p>Importing industries are <a href="https://www.econstor.eu/bitstream/10419/26285/1/559514182.PDF">less productive than exporting industries</a>. This is intuitive. If an importing industry were more efficient than the rest of the world, it would not be an importing industry in the first place.</p>
<h2>More than trade</h2>
<p>What is also lost in discussion is that the TPP is much more than a simple trade agreement. It also covers services and intellectual property. </p>
<p>While the US trade deficit in the first quarter of 2017 was approximately <a href="https://www.bea.gov/international/">US$65 billion a month</a>, the surplus in services offset a third of it. US exports in the service sector include <a href="https://www.bea.gov/newsreleases/international/trade/2017/trad0317.htm">over US$10 billion in royalties</a> on the use of American intellectual property. </p>
<p>The TPP would have been highly beneficial to the interests of the US software, publishing and financial firms. But to try to recapture the way of life of the 1950s, American politicians are forgetting about the industries of the 21st century. </p>
<p>At any rate, a zero trade deficit is a mirage in the case of the US. The country does not lose by importing more than it exports. It just means that it’s productive in other sectors. The <a href="https://www.bloomberg.com/news/articles/2017-03-01/trump-trade-friction-overlooks-america-s-huge-surplus-in-services">American financial sector is particularly strong</a> worldwide. </p>
<p>By withdrawing from the TPP, the US left a significant gap, as the total size of the trade agreement shrunk considerably. </p>
<p>The RCEP may fill it, or the countries may forge ahead without the US. It won’t be the same without the American market, but it should still bring enough benefits for the remaining countries to make it worthwhile to go through the trouble of enacting it.</p>
<p>While it may have been politically expedient, candidate – and now President – Trump was absolutely wrong when he said that “<a href="http://time.com/4386335/donald-trump-trade-speech-transcript/">trade reform</a> and the negotiation of great trade deals is the quickest way to bring our jobs back to our country”. </p>
<p><a href="http://www.apec.org/Press/News-Releases/2017/0516_tran">Globalisation is inevitable</a> and irreversible, as Vietnam’s president recently mentioned. </p>
<p>Most economists agree that free trade generates wider and greater benefits, and that’s why the US used to be a big promoter of deals such as the TPP. </p>
<p>The current US flip-flop is bad for the World Trade Organisation, which is likely to <a href="https://www.wto.org/english/news_e/news17_e/anti_10may17_e.htm">see more anti-dumping cases</a> (a dispute when <a href="https://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm">a country accuses another</a> of exporting goods at less than their normal value) by and against the US; for multilateral agreements, such as the TPP; and for the world, as protectionist talk increases the probability of trade wars.</p><img src="https://counter.theconversation.com/content/78105/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rodrigo Zeidan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The TPP should still bring enough benefits for the remaining countries to make it worthwhile to go through the trouble of enacting it.Rodrigo Zeidan, Associate Professor, NYU Shanghai and Fundação Dom Cabral, NYU ShanghaiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/735232017-02-26T19:05:25Z2017-02-26T19:05:25ZTrade data shows Australia can get more out of a deal with the EU than the UK<p>Australia should prioritise a free-trade agreement with the European Union to capitalise on <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2012-2013/EUAustUpdate">historically optimal relations</a>, rather than with the United Kingdom, immediately after a hard Brexit. A hard Brexit would see a sudden exit of the UK from the EU and now seems more likely given <a href="http://www.bbc.com/news/world-europe-38650877">UK Prime Minister Theresa May’s line on this</a>.</p>
<p>As part of our <a href="http://www.aph.gov.au/DocumentStore.ashx?id=31bb0b0c-6366-4674-b65a-789ed513f082&subId=463805">submission</a> to a <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/tradewithUK">parliamentary inquiry</a> we examined data on the flow of trade in goods and services between all three regions, separating out the UK from the EU. </p>
<p>The <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/tradewithUK">inquiry</a> is examining Australia’s trade and investment relations with the UK post Brexit, in particular the merit and risks of a possible bilateral free-trade agreement.</p>
<p>Australia should be striving to gain an advantage in any trade agreement, this means cooperating with a trade partner so that there is more crossover of exports and imports between the two countries and less competition.</p>
<p>When we looked at the data and when we compared Australia and the EU, there was much more crossover and less competition, than with the UK.</p>
<h2>Australian investors exposed</h2>
<p>We also compared the data on trade in goods and services to that of Australian investments in the UK and in the EU, and vice versa. We specifically separated out the UK from the EU to get an accurate picture of the post Brexit risks. </p>
<p>We examined two aspects of capital investment. Firstly the exposure of Australian investors who hold stocks and bonds in the the UK and EU financial markets and secondly any investor in the UK and EU who holds stocks and bonds in Australia.</p>
<p>The market volatility created by the hard Brexit will have a significant direct negative bearing on both the Australian financial market and to some extent on Australian portfolios abroad. </p>
<p>Notably, for the past decade the average exposure of Australian portfolios in the EU stocks and bonds markets (minus the UK) is worth nearly double than that in the UK. Overall the UK and EU stocks and bonds portfolios we studied jointly account for approximately more than one-fifth of all asset holdings in Australian financial markets. </p>
<p>Our analysis also highlights the importance of London as a gateway for the UK and EU funds destined for the Australian financial market. The future positioning of London post-Brexit can have deeper long-term implications for patterns of financial flows, and ultimately for Australia’s financial solidity.</p>
<p>Given the political uncertainty of <a href="http://www.politico.eu/article/brexit-trade-deal-ratification-could-take-until-2020-ex-ambassador/">post-Brexit negotiations between the UK and EU</a>, Australia’s <a href="http://dfat.gov.au/trade/economic-diplomacy/Pages/economic-diplomacy.aspx">economic diplomacy</a> should be mindful of sequencing trade and investment negotiations in ways that minimise financial exposure and maximise trade competitiveness with the various European partners.</p>
<h2>Likelihood of a hard Brexit</h2>
<p>No formal Australian trade negotiations with the UK can be pursued until the conclusion of its withdrawal process from the EU. Only then the UK will become a separate customs entity and so being entitled to negotiate international trade agreements.</p>
<p>Considering the present political climate and <a href="http://www.politico.eu/article/brexit-negotiation-issues-worrying-the-european-parliament/">technical difficulties</a>, it appears <a href="http://www.politico.eu/article/uk-will-leave-eu-before-trade-agreement-in-place-van-rompuy/">unlikely that the UK and EU will finalise an agreement before the two-year term</a> set by Article 50 of the EU Treaty. This is also even unlikely to happen before the advance of the <a href="http://dfat.gov.au/trade/agreements/aeufta/Pages/aeufta.aspx">Australia-EU free trade agreement</a>.</p>
<p>Without a timely agreement, the UK and EU will revert by default to the multilateral <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm">rules of the World Trade Organisation</a>. </p>
<p>For Australia’s trade and investment relationship with the UK, this reset would be an improvement from the present subordination to the European single market. However, it’s uncertain whether this regulatory levelling would necessarily improve Australia’s economic outcomes. </p>
<p>Nonetheless, pundits in both hemispheres are calling for a <a href="http://www.express.co.uk/news/uk/744863/Australian-High-Commissioner-free-trade-prosperous-Brexit">quick bilateral deal</a> to counter the uncertainties of the Brexit process. Yet, there is no clear evidence of economic gains to be reaped from a new bilateral free trade agreement immediately after the Brexit process concludes. </p>
<p>In fact, as established by the <a href="http://www.pc.gov.au/inquiries/completed/trade-agreements">2010 Australian Government’s Productivity Commission Report</a>, bilateral and regional free trade agreements “can significantly increase trade flows between partner countries, although some of this increase is typically offset by trade diversion from other countries”. </p>
<p>It’s crucial to ensure that any future preferential trade and investment arrangements with the UK and EU will be negotiated in Australia’s economic interests with a rigorous and transparent evidence-based approach.</p>
<p>Australia should avoid multilateral options and hasty blanket deals with the UK. Instead, Australia’s end game should be at separate bilateral levels in carefully targeted sectors with both the UK and EU, in order to achieve more favourable trading terms than the UK can score with the EU and vice versa.</p><img src="https://counter.theconversation.com/content/73523/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Treisman is affiliated with the Contemporary European Studies Association of Australia (CESAA) and the Royal Geographic Society</span></em></p><p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA), with the Contemporary European Studies Association of Australia (CESAA), and with NOMiT Inc (Network of Italians in Melbourne).</span></em></p>Analysis shows there’s less competition and more cross over in trade between Australia and the EU, making a trade deal more appealing.David Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash UniversityGiovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/722432017-02-02T02:57:30Z2017-02-02T02:57:30ZTrump’s trade policy is more predictable and less isolationist than critics think<p>In his first full week in office, President Donald Trump unleashed a whirlwind of actions that have deep ramifications for U.S. trade. Although critics have labeled the actions “<a href="http://www.newsweek.com/donald-trump-united-nations-trade-nafta-tpp-549407">unpredictable</a>,” “<a href="http://www.nationalreview.com/article/444321/trumps-foreign-policy-isolationism-america-first-not-countrys-interest">isolationist</a>” and “<a href="http://www.nbcnews.com/politics/white-house/analysis-trump-s-america-first-vision-could-upend-postwar-consensus-n714741">chaotic</a>,” they provide an instructive outline of his new trade policy. </p>
<p>The president began the week by <a href="https://www.whitehouse.gov/the-press-office/2017/01/23/presidential-memorandum-regarding-withdrawal-united-states-trans-pacific">signing</a> a memorandum directing the United States’ withdrawal from the Trans-Pacific Partnership (TPP). Later in the week, he <a href="https://www.theguardian.com/commentisfree/2017/jan/27/the-guardian-view-on-the-trump-may-meeting-they-are-playing-with-fire">met</a> with British Prime Minister Theresa May to discuss greater bilateral cooperation, including a post-Brexit <a href="http://www.telegraph.co.uk/news/2017/01/22/theresa-may-donald-trump-hold-talks-trade-deal-cuts-tariffs/">trade deal</a>.</p>
<p>His new envoy to the United Nations, Nikki Haley, called for reform of that organization. She even issued a blunt <a href="http://www.cnn.com/2017/01/27/politics/haley-un-first-day/">warning</a>: “For those who don’t have our backs, we’re taking names.”</p>
<p>As if these developments were not complicated enough, President Trump <a href="https://www.whitehouse.gov/the-press-office/2017/01/27/executive-order-protecting-nation-foreign-terrorist-entry-united-states">signed</a> an executive order on Friday requiring the “<a href="http://www.cnn.com/2017/01/29/politics/donald-trump-executive-order-statement/">extreme vetting</a>” of citizens of seven Muslim majority countries seeking to enter the United States. The related <a href="https://theconversation.com/trumps-order-barring-refugees-flies-in-the-face-of-logic-and-humanity-72061">travel ban</a> sparked <a href="http://www.cnn.com/2017/01/29/politics/us-immigration-protests/">protests</a> at airports around the country.</p>
<p>While it still remains unclear how President Trump’s trade policy will evolve, his first full week has provided some good indications of what to expect in the next four years. The new policy is also more nuanced and consistent than his critics have given him credit for. </p>
<h2>Shift from multilateralism to bilateralism</h2>
<p>As shown by his handling of the TPP, the United Nations and Anglo-American relations, President Trump harbors a strong distrust of the existing multilateral system. This system covers not only the United Nations, the World Trade Organization (WTO) and the World Bank but also regional efforts such as the TPP, the Transatlantic Trade and Investment Partnership (TTIP) and the North American Free Trade Agreement (NAFTA).</p>
<p>This shift away from multilateralism is a major departure from the Obama administration. While President Barack Obama <a href="https://www.brookings.edu/research/mr-obama-goes-to-new-york-the-president-and-the-restoration-ofmultilateral-diplomacy/">went</a> out of his way to team up with other nations, President Trump wants none of this.</p>
<p>Instead, he prefers bilateral negotiations that will maximize the United States’ bargaining strengths, drawing on the country’s superpower status and 300-million-strong market. Such one-on-one negotiations will also ensure a dedicated focus on those core issues that are important to both sides.</p>
<p>Although some commentators and pundits may characterize this changing approach as isolationist, the <a href="https://www.whitehouse.gov/the-press-office/2017/01/23/presidential-memorandum-regarding-withdrawal-united-states-trans-pacific">presidential memorandum</a> concerning TPP withdrawal made it clear that the administration will continue to negotiate trade deals with other members of the partnership. Those deals will just have to be negotiated through the bilateral route.</p>
<h2>Preference for the ‘John Wayne’ approach</h2>
<p>Going hand in hand with a renewed emphasis on bilateral negotiations is the administration’s <a href="http://www.washingtontimes.com/news/2016/dec/6/donald-trump-rattles-us-businesses-with-twitter-th/">preference</a> for hard bargaining and ultimatums. Stemming from President Trump’s <a href="http://theowp.org/reports/the-problems-with-donald-trumps-foreign-policies/">penchant</a> for negotiation from strength, this preference will likely result in a lot of saber-rattling between the United States and its trading partners.</p>
<p>While the embrace of this “John Wayne” approach will undoubtedly make the United States unpopular within the international community, hardball tactics will enable the country to obtain more of its demands while offering fewer concessions. These tactics, in turn, will allow President Trump to keep his campaign promise of putting <a href="http://www.freep.com/story/opinion/columnists/brian-dickerson/2017/01/21/trump-america-first/96865480/">America first</a>.</p>
<p>At times, the administration will surely make missteps by overplaying its hand. For example, President Trump’s repeated insistence that Mexico will pay for his proposed border wall appears to have backfired after Mexican President Enrique Peña Nieto <a href="http://www.cnn.com/2017/01/25/politics/mexico-president-donald-trump-enrique-pena-nieto-border-wall/index.html">canceled</a> a previously scheduled face-to-face meeting. The two eventually <a href="http://www.usatoday.com/story/news/politics/2017/01/27/trump-speaks-mexico-president-after-meeting-cancelled/97139096/">settled</a> for a phone conversation.</p>
<p>For countries with complicated politics such as China and India, strong-arm tactics and hard bargaining could also complicate the negotiations. In these countries, things could easily get out of control with the <a href="https://www.nytimes.com/2016/12/15/world/asia/trump-taiwan-china.html">increasingly nationalistic</a> populace. </p>
<p>If the Chinese and Indian populace fails to get the correct signals and overreacts, their leaders may find their hands are tied, even if President Trump offers to provide follow-up private clarifications.</p>
<p>For China especially, such complications could arise if the administration <a href="http://www.forbes.com/sites/sarahsu/2016/11/14/how-far-can-trump-go-on-chinese-trade-policy">insists</a> on naming the country a currency manipulator and slapping its imports with a 45 percent tariff. Such <a href="http://fortune.com/2016/11/10/donald-trump-china-trade/">drastic measures</a> could not only lead to a mutually destructive <a href="http://www.vox.com/world/2016/11/22/13676356/trump-trade-war-china">trade war</a> but also undesirable <a href="http://www.reuters.com/article/us-usa-china-trade-idUSKBN13I2DO?il=0">WTO complaints</a> or even penalties against the United States.</p>
<h2>Reduced regional emphasis</h2>
<p>Under the Trump administration, trade deals are unlikely to be developed through a region-based approach, whether through the bilateral or multilateral route. Within Asia, for example, Cambodia and Laos are just not as important as Japan and South Korea.</p>
<p>Instead, the deals the administration negotiates are likely to be more opportunistic. They could emerge in Asia, Europe and the Middle East at the same time without the constraints imposed by a region-based trade policy.</p>
<p>This nongeographical yet ironically global approach stands in sharp contrast to the Obama administration’s “<a href="http://www.foreignpolicyi.org/content/obama-administrations-pivot-asia">pivot to Asia</a>.” President Obama was not only eager to <a href="https://www.washingtonpost.com/opinions/president-obama-the-tpp-would-let-america-not-china-lead-the-way-on-global-trade/2016/05/02/680540e4-0fd0-11e6-93ae-50921721165d_story.html?utm_term=.df3befdec1b8">rewrite</a> the trade rules for the Asia Pacific region, but he emphasized the region’s importance by <a href="http://www.cnn.com/2009/POLITICS/02/15/us.clinton.asia.trip/">sending</a> his first secretary of state, Hillary Clinton, to Asia on her first state visit.</p>
<p>For the Trump administration, it will still be interesting to see where newly confirmed Secretary of State Rex Tillerson will visit first. That trip, however, may not be as indicative of the administration’s policy focus as Secretary Clinton’s was.</p>
<h2>Trump’s trade policy takes shape</h2>
<p>The Trump administration’s new trade policy is still at its infancy. So it will continue to evolve. A raging debate concerning its expediency and sustainability will also continue, especially in this highly polarized post-election environment.</p>
<p>Nevertheless, this policy is not as “<a href="http://www.newsweek.com/donald-trump-united-nations-trade-nafta-tpp-549407">unpredictable</a>” and “<a href="http://www.nbcnews.com/politics/white-house/analysis-trump-s-america-first-vision-could-upend-postwar-consensus-n714741">chaotic</a>” as many critics have claimed. Instead, the policy is more nuanced and consistent. It can be traced back to not only the president’s campaign promises but also his early <a href="https://theconversation.com/america-has-never-been-truly-isolationist-and-trump-isnt-either-71689">open letters</a> in the mass media.</p>
<p>For those who strongly believe in the multilateral trading system, which dates back to the end of the Second World War, his policy will undoubtedly undermine the stability of this system. This policy could also lead to new tensions and confrontations in the international trade arena.</p>
<p>We will just have to wait and see as President Trump’s new trade policy slowly takes shape.</p><img src="https://counter.theconversation.com/content/72243/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter K. Yu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trade under Trump will mean more bilateral agreements, hard bargaining and ultimatums, a sharp departure from Obama’s multilateral, win-win approach.Peter K. Yu, Professor of Law and Co-Director of the Center for Law and Intellectual Property, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/715802017-01-27T15:31:51Z2017-01-27T15:31:51ZTrade deals are difficult to negotiate and Britain lacks the skills for the job<figure><img src="https://images.theconversation.com/files/154541/original/image-20170127-30401-a7iidq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Troubled waters ahead.</span> <span class="attribution"><span class="source">Paul J Martin / Shutterstock, Inc.</span></span></figcaption></figure><p>Britain’s prime minister is the first foreign leader to visit the new American president, Donald Trump. They have <a href="http://www.bbc.co.uk/news/uk-politics-38766781">lots to discuss</a> – international security, immigration, “the special relationship”. There is also much talk of laying the ground for a US-UK trade deal.</p>
<p><a href="http://www.independent.co.uk/news/uk/politics/brexit-latest-theresa-may-donald-trump-trade-deal-european-union-eu-us-a7548511.html">Much of the talk</a> of a trade deal, however, misses some of the fundamentals of what trade deals actually are and what they involve. They are agreements over the extent to which countries will agree the scale and scope of access to each other’s markets. These may be reciprocal: “We agree to trade in cars in both directions with a 10% tariff.” Or they can be quotas, limiting the quantity or value of certain goods that can be traded.</p>
<p>Alternatively they can be multi-faceted: “We agree to have no restrictions on you exporting gin to us if we can export bourbon to you on the same terms.” They are not, as most politicians seem to think: “We agree to buy £100m worth of stuff from you if you buy £100m worth of stuff from us.” </p>
<p>So why does the UK need these deals at all? It could simply have free trade with everyone – <a href="http://brexitcentral.com/patrick-minford-unilateral-free-trade-far-attractive-membership-single-market/">and some people have made the case for this</a>. In practice, this would mean offering other countries free access to its markets and hoping that they would reciprocate. Countries would only agree to this where they think it is in their interests – where they assume they will sell more to us than we will to them.</p>
<p>In this situation, comparative advantage dominates. This means that production (all those manufacturing jobs) gravitates to the location with the lowest costs. This is often politically unacceptable, as governments generally look to protect jobs and tax revenues, as well as to protect activities that fund innovation. </p>
<h2>The difficult bit</h2>
<p>This is why there is so much talk of trade deals going on. But the difficult part of a trade deal is not the negotiation itself; it’s figuring out which industries will gain or lose from a given deal, and what the overall outcome will be, given the knock-on effect for various sectors of the economy. Equally, they must take into account how businesses will respond to a given agreement and what lobbying they will they do in advance.</p>
<p>Negotiators are essentially like barristers that put forward arguments based on the analysis that they are given.</p>
<p>A closer look at how the much vaunted UK-US “trade deal” would work shows what’s really involved. In order to ascertain whether this will be “good” for the UK, you have to start with an understanding of what the nature of comparative advantage is between the UK and US – what is the UK better at than the US, and what is the US better at than the UK. Then you have to work out how this relates to goods and services that each wishes to trade. </p>
<p>For example, one could argue that the UK has comparative advantage in whisky, and the US in bourbon. But just because the imported products become cheaper after a reduction in tariffs, does that mean that the UK will actually import more bourbon and, if so, might that actually be bad for the Scotch whisky industry?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=460&fit=crop&dpr=1 600w, https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=460&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=460&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=578&fit=crop&dpr=1 754w, https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=578&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/154540/original/image-20170127-30419-1wmpnkq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=578&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Whisky or bourbon?</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
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<p>Then it’s necessary to work out the overall effect on each economy – by combining the comparative advantage for all sectors (from agriculture to pharmaceuticals), and work out if the deal is a good one. </p>
<h2>A lack of experts</h2>
<p>The UK used to have “sector experts” who knew everything about their sector to figure this out. But it hasn’t needed them for 25 years, as the EU has performed this role on the UK’s behalf. As a result, the civil service has neither the capacity or the skills <a href="https://theconversation.com/the-civil-service-must-keep-calm-and-carry-on-with-brexit-but-can-it-65506">to fill this gap</a>. Equally, many private sector firms had economics departments – Unilever, British American Tobacco, Ford among them – whose job it was to figure out what would happen to their sector if certain tariffs were agreed (or not). But neither the private nor public sectors have had those skills for a generation because they have not been needed.</p>
<p>The large professional service firms are circling to do the job – at <a href="http://www.telegraph.co.uk/news/2016/09/29/planning-for-brexit-could-cost-the-government-65-million-a-year/">£2,000 per person per day</a> – but they are generalists. They don’t know any more whether we will import statins and export heart pills under a given deal with the US any more than the editor of the Daily Mail or the prime minister.</p>
<p>Without an in-depth analysis of relative production costs, spillovers between sectors and the multiplier effects associated with sectors expanding or contracting, this is all simply conjecture – which is essentially what has been happening since this debate over Brexit started.</p><img src="https://counter.theconversation.com/content/71580/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nigel Driffield receives funding from ESRC, Leverhulme Trust, OECD, UNCTAD, European Commission DG Region. He is an inactive member of the labour party and a member of the UCU.</span></em></p>Much of the debate around trade deals misses some of the fundamentals of what they actually are and involve.Nigel Driffield, Professor of international business, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/718212017-01-26T07:47:32Z2017-01-26T07:47:32ZCan the Trans Pacific Partnership survive after Trump?<p>True to his promise, President Donald Trump <a href="https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html">withdrew the US from the Trans Pacific Partnership</a> within 72 hours of assuming office. His decision has many implications for trade and geostrategic issues in the Asia Pacific, and <a href="http://www.cbsnews.com/news/trans-pacific-partnership-members-try-to-salvage-pact-trump/">remaining members are planning to meet</a> and discuss their options. </p>
<p>The TPP is an ambitious <a href="http://www.bbc.com/news/business-32498715">regional trade agreement comprising 12 countries</a> – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Singapore, Peru, Vietnam and the United States – accounts for around 40% of world GDP. </p>
<p>Negotiations concluded in October 2015, and the deal was <a href="http://www.thehindu.com/business/12-nations-sign-transpacific-partnership-trade-deal/article8191992.ece">signed by members in February 2016</a>. But it needed to be ratified by at least six signatories – accounting for 85% of the total GDP of the bloc – to come into force. </p>
<p>Unless the US, which is the largest economy in the bloc, ratifies, it cannot. And, in this sense, the agreement is no longer a possibility.</p>
<h2>Reports of an early death</h2>
<p>The Trans Pacific Partnership ran into rough weather during the US presidential election campaign last year; <a href="http://www.businessinsider.com/what-is-tpp-2016-9">opposition to the deal was bipartisan</a>. Apart from Trump, <a href="https://www.sanders.senate.gov/download/the-trans-pacific-trade-tpp-agreement-must-be-defeated?inline=file">Bernie Sanders was heavily opposed</a> to the agreement. Even Hillary Clinton, who supported it during her tenure as Secretary of State in the Obama administration, <a href="http://www.seattletimes.com/opinion/editorials/hoping-hillary-clinton-changes-her-mind-on-the-trans-pacific-partnership/">began opposing it</a> soon after the text of the agreement became public. </p>
<p>Indeed, there was <a href="https://www.nytimes.com/interactive/2016/us/elections/trans-pacific-partnership.html">hardly any prominent political voice in favour</a> of the Trans Pacific Partnership during the election campaign. </p>
<p>Although the Obama administration <a href="http://abcnews.go.com/Business/pushing-tpp-president-obama-argument-trump-clinton/story?id=41074632">remained committed</a> until the very end, the chances of it being taken forward for ratification by a new administration – headed by either Hillary Clinton or Donald Trump – were distinctly remote. Clinton would have at the very least called for renegotiation. </p>
<p>Other members were hoping that the conclusion of the election would <a href="http://www.ictsd.org/bridges-news/bridges/news/asia-pacific-leaders-consider-next-steps-for-tpp-accord">lead to a more objective assessment</a> of the agreement by the new administration. But Trump’s swift action has dashed all such hopes. </p>
<p>Is it the end of the road for the agreement then? Other members, such as Australia, Japan, Canada and New Zealand have repeatedly affirmed their commitment to the agreement over the past few months. But are they be willing to move ahead without the US? </p>
<h2>Failed pivot</h2>
<p>The TPP would not be the same without the US. The economic size of the agreement would reduce significantly, along with its geostrategic importance. </p>
<p>The Trans Pacific Partnership was a key element of the Obama Administration’s “<a href="http://foreignpolicy.com/2011/12/21/the-american-pivot-to-asia/">pivot to Asia</a>”: a strategy for establishing a US-led regional order in the Asia Pacific. All non-US members are strategic allies and partners of the US. </p>
<p>They were enthusiastic about the agreement as it aimed to institutionalise common rules for trade and business fashioned by the US. The country’s withdrawal greatly reduces the possibility of a <a href="http://thediplomat.com/2015/11/abe-touts-the-tpp-in-battle-to-define-the-regional-order/">US-led regional order in the Asia Pacific</a>. </p>
<p>It also creates a <a href="https://theconversation.com/china-capitalises-on-trumps-hostility-to-trade-with-a-new-deal-for-asia-pacific-68685">vacuum in regional economic leadership</a>. </p>
<p>Australia has already begun <a href="http://www.abc.net.au/news/2017-01-24/donald-trump-tpp-federal-government/8207250?WT.mc_id=newsmail&WT.tsrc=Newsmail">searching for solutions to revive the agreement</a>. the government there says it’s willing to push ahead with the Trans Pacific Partnership without the US and to reformulate the deal to include presently excluded countries, <a href="https://amp.theguardian.com/australia-news/2017/jan/24/australia-open-to-china-and-indonesia-joining-tpp-after-us-pulls-out">such as Indonesia and China</a>. </p>
<p>But China’s entry might be opposed by existing members such as Japan and Vietnam due to their awkward geopolitical relations with the country.</p>
<h2>End of the line</h2>
<p>If the remaining members of the Trans Pacific Partnership decide to reformulate the agreement to make it work without the US, then the Asia-Pacific region could still have a trade agreement that’s more modern and ambitious than most other trade agreements in the world. Successful implementation would send a strong signal about the region’s commitment to free trade and globalisation. </p>
<p>But the agreement could be as good as dead if, instead of pushing ahead without the US, its members decide to explore bilateral trade agreements with the country. This is exactly what the Trump administration will be hoping for.</p>
<p>Donald Trump’s <a href="https://www.whitehouse.gov/the-press-office/2017/01/23/presidential-memorandum-regarding-withdrawal-united-states-trans-pacific">trade policy is to deal bilaterally</a> with countries rather than in a regional framework. One-on-one negotiations give more chances to the US to maximise the interests of American industries and workers. </p>
<p>The US may hope to work out bilateral trade deals with those Trans Pacific Partnership members with whom it doesn’t have similar accords already, such as Japan, Malaysia, Brunei, Vietnam and New Zealand. </p>
<p>Regional trade frameworks bind all members to a common set of rules. But the US can use its strategic influence and its role as a security provider to persuade allies, such as Japan, to enter into bilateral agreements instead. </p>
<p>If it succeeds in doing so, many Trans Pacific Partnership signatories may lose interest in a regional trade agreement. And that would certainly be curtains for accord.</p><img src="https://counter.theconversation.com/content/71821/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitendu Palit does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The agreement could be as good as dead, if, instead of pushing ahead without the US, its members decide to explore bilateral trade agreements with the country.Amitendu Palit, Senior Research Fellow & Research Lead (Trade and Economic Policy) at the Institute of South Asian Studies (ISAS), National University of SingaporeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/672402017-01-16T07:51:36Z2017-01-16T07:51:36ZWas 2016 the year the world turned its back on free trade?<p>Fear of and misunderstanding about free trade and globalisation brought us a turbulent 2016. And the last few months have been a wake-up call about the dramatic slowdown in international trade, presaging a major change in global policies. </p>
<p><a href="https://www.wto.org/english/news_e/pres16_e/pr779_e.htm#_ftnref1">In its September forecast</a>, the World Trade Organization (WTO) warned that it was worried world trade would only grow by 1.7% (in volume) in 2016. This is its lowest growth since 2009, the year of the <a href="http://www.newyorker.com/magazine/2008/12/01/anatomy-of-a-meltdown">global financial crisis</a>, when international trade started retreating. </p>
<p>Worse still is the phenomenon of international trade growing at a slightly slower pace than global production. The ratio of international trade-to-GDP, which indicates the relative importance of international trade in the economy of a country, has <a href="https://www.wto.org/english/res_e/statis_e/wts2016_e/wts2016_e.pdf">been falling sharply since 2009</a> except a gradual recover in 2010-2011. </p>
<p>According to the <a href="http://www.imf.org/external/pubs/ft/weo/2016/02/">October 2016 IMF World Economic Outlook</a>, international trade in goods and services has grown at the mediocre rate of around 3% a year since 2012, less than half of the growth of the previous three decades. <a href="http://www.imf.org/external/pubs/ft/weo/2016/02/">Between 1985 and 2007</a>, world trade increased, on average, twice as fast as world production, whereas for the past four years it has just kept pace. </p>
<p>This is an historic change. If the WTO forecast for 2016 were to be confirmed, world trade would have risen less rapidly than world GDP, which grew <a href="http://www.imf.org/external/pubs/ft/weo/2016/02/">between 2.2% and 2.9%</a> in the first half of 2016.</p>
<h2>The end of globalisation?</h2>
<p>This could indeed be evidence for the beginning of globalisation going in reverse. The globalisation of trade means that countries trade more and more with each other, and that trade between them increases faster than their national production.</p>
<p>Has globalisation, which is the modern form of the international division of labour, reached its peak? Those good old times when companies, mainly multinationals, achieve production efficiency and generated more revenue through outsourcing their labour-intensive work abroad than manufacturing at home. </p>
<p>The IMF suggests three explanations for the decline in trade regimes: the slowdown in global economic growth; the halt in trade and investment liberalisation agreements (which started long before the <a href="http://www.telegraph.co.uk/business/2016/11/22/difference-ttip-tpp-does-donald-drump-want-scrapped/">freezing of the Trans Pacific Partnership or the Trans Atlantic Trade and Partnership agreements</a>); and the maturity of international production chains that would have exhausted their advantages. </p>
<p>Geopolitical competition in global trade agenda-setting among the US, the European Union and emerging powers, such as China and India, and <a href="https://www.ft.com/content/2dd0ecc4-3768-11e6-a780-b48ed7b6126f">increasingly popular protectionism rhetoric</a> in national trade debates also explain the <a href="http://asia.nikkei.com/Viewpoints/Patrick-Low/R.I.P.-TPP-time-to-turn-back-to-the-WTO">failure or lack of cooperation in the multilateral trading system</a>.</p>
<h2>Three types of explanations</h2>
<p>IMF experts estimate that the slowdown in economic growth since 2012, after the temporary catch up in 2010 and 2011, explains by itself “<a href="http://www.imf.org/external/pubs/ft/weo/2016/02/pdf/c2.pdf">about three-quarters of the dramatic slowdown trade</a>”. </p>
<p>Proof of this, they argue, is that it’s investment products, and secondarily, durable household goods, such as cars, whose trade has slowed down the most. They note that slowdown of goods consumption affects 143 countries out of 171 under review, including China, Brazil and the nations in the Euro area, among others. </p>
<p>In this respect, the period between 2012 and 2016 will have been particularly volatile in terms of world trade, resulting from the collapse of oil and commodity prices. The IMF notes that this fall itself <a href="http://www.imf.org/external/pubs/ft/weo/2016/02/pdf/c2.pdf">resulted in a 10.5% contraction of all international trade</a> in 2015, when looking at all products. </p>
<p>This has resulted in considerable loss of purchasing power for many countries and billions of consumers, and thus a reorientation of demand at the expense of durable goods, which have become inaccessible to many. Added to this are national trade imbalances – the surpluses of some countries and the deficits of others – that have also acted as a brake on trade.</p>
<p>The second explanation for shrinking international trade stems from the general global climate, which has <a href="http://blogs.wsj.com/economics/2016/09/06/trade-protectionism-risks-deeper-global-growth-funk-imf-warns/">become more protectionist</a>. The IMF notes that, in the 1990s, an average of 30 trade liberalisation agreements were signed annually between countries. But <a href="https://www.imf.org/external/pubs/ft/weo/2016/02/c2/fig2_10.pdf">barely ten such agreements</a> have been signed each year since 2011.</p>
<p>Free trade agreements <a href="http://www.economicshelp.org/trade/benefits_free_trade/">include deeper provisions</a> that go beyond trade barriers and more partners can significantly reduce the cost of trade, which, in turn, helps boost trade flows.</p>
<p>The third reason for the brake on trade is the decline in the growth of <a href="https://www.oecd.org/sti/ind/global-value-chains.htm">global value chains</a>, which is the idea that the process of production consists of many stages and occurs across borders. But this phenomenon, which developed at a very high rate after China’s accession to the WTO in 2001 as the country emerged as a global supplier, has now reached cruising pace. </p>
<p>Similarly, the fall in the cost of cross-border transportation and international cost of telecommunications, which had contributed so much to trade, would also have met its limit. And they probably contribute modestly to the decline of global trade.</p>
<p>But even as they worry about the disappointing numbers, countries remain very divided on what to do next. In fact, we may be witnessing the <a href="http://www.independent.co.uk/news/business/comment/satyajit-das-rise-of-economic-nationalism-is-threat-to-global-prosperity-8673865.html">return of an economic nationalism that threatens</a> withdrawal from the global market. </p>
<h2>Prospects for 2017</h2>
<p>It seems, then, that the only diagnosis is that the global economy is slowing down and the risks to recovery are picking up. Challenges range from <a href="http://www.economist.com/news/finance-and-economics/21701292-uncertainty-abounds-expect-global-chilling-effect-investment-why-brexit">Brexit</a> to the <a href="http://voxeu.org/article/emerging-markets-crossroads">slowdown in emerging markets</a>, from the <a href="https://theconversation.com/why-the-commodities-crunch-could-hurt-stability-in-latin-america-53149">collapse of commodity prices</a> to rising <a href="http://www3.weforum.org/docs/Media/TheGlobalRisksReport2016.pdf">geopolitical tensions</a>.</p>
<p>Part of the problem is that the level of public debt of countries is too high for them to have significant <a href="http://www.slate.com/blogs/the_slatest/2015/07/15/i_m_f_demands_greek_debt_relief_from_europe_in_return_for_bailout.html">room for manoeuvre</a>. And countries that have the means, such as Germany, refuse to spend more.</p>
<p>At least, in the last months of 2016 the <a href="http://www.g20chn.com/xwzxEnglish/sum_ann/201609/t20160906_3397.html">G20 leaders’ communique recognised the impact excess capacity</a> has had on the global economy and there’s now a chance of focusing on this problem. <a href="http://www.economist.com/blogs/economist-explains/2016/05/economist-explains-4">Excess global capacity</a> in steel and other industries is mainly a result of falling demand, rising production and excessive government subsidies. </p>
<p>The impact of the crisis has been so severe on market demand that all G20 leaders are turning to overcapacity, following the example of China. Until current overcapacity is absorbed, the recovery will be slow. </p>
<p>But the remedy has the social cost of job loss, and that could fuel the already high risk in the United States and Europe of fragmented national politics. </p>
<p>On the bright side is the noteworthy <a href="http://e15initiative.org/publications/g20-guiding-principles-for-global-investment-policymaking-a-facilitators-perspective/">G20 Guiding Principle for Global Investment Policymaking</a> reached under Chinese presidency and endorsed by G20 heads of state. It lays out a roadmap for future investment policy and the correlation between investment and sustainable development.</p>
<p>In the 19th century, <a href="http://www.economist.com/blogs/freeexchange/2013/09/economic-history">debates over drivers of economic growth</a> – tariffs or free trade – dominated the political scene. Mercifully, the idea of free trade has persisted but it now faces serious challenges.</p>
<p>It seems that, at best, 2017 will be another difficult year. The most we may be able to hope for is that national trade-restriction measures will be compatible with WTO rules.</p>
<p>In any event, we have not finished paying for the consequences of the financial crisis. If history is any indication, trade deals, which are always better in the multilateral format (such as under the WTO), are the world’s best hope for avoiding another global recession.</p><img src="https://counter.theconversation.com/content/67240/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We could be witnessing the beginning of globalisation going in reverse.Julien Chaisse, Professor of Law, City University of Hong KongQian Wang, Research Assistant, Faculty of Law, Chinese University of Hong KongLicensed as Creative Commons – attribution, no derivatives.