tag:theconversation.com,2011:/global/topics/free-trade-agreement-8329/articlesFree trade agreement – The Conversation2022-12-08T19:24:00Ztag:theconversation.com,2011:article/1961222022-12-08T19:24:00Z2022-12-08T19:24:00ZWhat is the Indo-Pacific Economic Framework, about to be negotiated in Brisbane?<figure><img src="https://images.theconversation.com/files/499738/original/file-20221208-24-ctxrb1.jpg?ixlib=rb-1.1.0&rect=670%2C610%2C3245%2C1682&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>Australia is about to play host to negotiators from 14 countries involved in the Indo-Pacific Economic Framework (<a href="https://www.dfat.gov.au/trade/organisations/wto-g20-oecd-apec/indo-pacific-economic-framework">IPEF</a>) over six days in Brisbane from Saturday. </p>
<p>They include the United States, Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam, but not China.</p>
<p>Although as unfamiliar as many of the acronyms in the <a href="https://www.dfat.gov.au/trade/agreements/trade-agreements">alphabet soup</a> of trade deals to which Australia is a party, the IPEF has a very specific focus.</p>
<p>The US wants to use it to diversify its supply chains away from China towards its allies and create US-style rules in a region encompassing the Indian and Pacific Oceans and extending from the east of Africa to the west of the United States.</p>
<p>At the <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/may/fact-sheet-asia-president-biden-and-dozen-indo-pacific-partners-launch-indo-pacific-economic">launch</a> of negotiations in May the US said the agreement would</p>
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<p>enable the United States and our allies to decide on rules of the road that ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific.</p>
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<p>And the US is not involved in the two other big regional trade agreements involving IPEF members including Australia:</p>
<ul>
<li><p>the Regional Comprehensive Economic Partnership <a href="https://theconversation.com/weve-just-signed-the-worlds-biggest-trade-deal-but-what-is-the-rcep-150082">(RCEP)</a> of the ten ASEAN nations plus five others including China</p></li>
<li><p>the Comprehensive and Progressive Trans-Pacific Partnership (<a href="https://theconversation.com/the-senate-is-set-to-approve-it-but-what-exactly-is-the-trans-pacific-partnership-104918">CPTPP)</a> of 11 nations excluding China, from which the Trump administration withdrew in 2016.</p></li>
</ul>
<p>There is still strong bipartisan US Congressional opposition to legally binding agreements like the CPTPP. This means in negotiating IPEF the US will not offer <a href="https://crsreports.congress.gov/product/pdf/IN/IN11814">increased market access</a> to Australia or other member countries.</p>
<p>The “four pillars” of the framework are </p>
<ol>
<li><p><a href="https://ustr.gov/sites/default/files/2022-09/IPEF%20Pillar%201%20Ministerial%20Text%20(Trade%20Pillar)_FOR%20PUBLIC%20RELEASE%20(1).pdf">trade</a>, in which there will be a general commitment to boost trade among members while recognising labour rights, environmental and other concerns</p></li>
<li><p><a href="https://www.commerce.gov/sites/default/files/2022-09/Pillar-II-Ministerial-Statement.pdf">supply chains</a>, aimed at diversifying away from China and facilitating cooperation among members in the event of major disruptions</p></li>
<li><p><a href="https://www.commerce.gov/sites/default/files/2022-09/Pillar-III-Ministerial-Statement.pdf">clean economy</a>, in which there will be recognition of the role of incentives in encouraging energy transitions</p></li>
<li><p><a href="https://www.commerce.gov/sites/default/files/2022-09/Pillar-IV-Ministerial-Statement.pdf">fair economy</a>, in which the members commit to preventing and combating corruption and tax evasion.</p></li>
</ol>
<p>India has <a href="https://www.thehindubusinessline.com/opinion/opting-out-of-ipef-trade-pillar-was-necessary/article65938850.ece">opted out</a> of the trade pillar but says it will sign up to the other pillars.</p>
<p>This means the IPEF will offer no immediate trade benefits for Australia or other countries, but for developing countries it will offer the prospect of US energy and other projects as an alternative to China’s <a href="https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/briefingbook45p/chinasroad#:%7E:text=The%20'One%20Belt%2C%20One%20Road,one%20overland%20and%20one%20maritime">One Belt One Road</a> initiative.</p>
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<a href="https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499718/original/file-20221208-14-uu5no9.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&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="attribution"><a class="source" href="https://thenewamerican.com/chinese-globalism-southeast-asian-nations-sign-rcep-to-build-free-trade-area-of-the-asia-pacific-ftaap/">Christian Gomez/The New American</a></span>
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<h2>More open process but negotiating documents secret</h2>
<p>The Albanese government’s <a href="https://alp.org.au/media/2594/2021-alp-national-platform-final-endorsed-platform.pdf">policy</a> promises more transparent and accountable trade negotiations, including access to negotiating texts and independent evaluation of their costs and benefits.</p>
<p>It has promised this for the IPEF, and both civil society and business organisations have been invited to present their views to IPEF negotiators in Brisbane. </p>
<p>But this will be a one-way street because Australia and other IPEF countries have signed <a href="https://ustr.gov/sites/default/files/foia/US-Australia%20Signed%20IPEF%20Trade%20Pillar%20Confidentiality%20Agreement_06292022.pdf">agreements with the US</a> pledging to keep all negotiating documents secret until five years after the negotiations. </p>
<p>Without access to the details of the proposals, consultation will be extremely limited.</p>
<h2>Standards on human rights, labour and the environment</h2>
<p>Civil society groups have made <a href="http://aftinet.org.au/cms/sites/default/files/221024%20%20AFTINET%20IPEF%20submisssion%20to%20DFAT%20fiinal.pdf">submissions</a> supporting the IPEF goals of higher standards for labour rights and environmental protection, and are asking for them to be made fully enforceable. </p>
<p>It remains to be seen whether all IPEF countries will commit to these goals without the carrot of access to the US market, and how commitments would be enforced unless they were legally binding.</p>
<h2>A strategic balancing act for Australia</h2>
<p>Australia is a US ally, but China is Australia’s largest export market.</p>
<p>Foreign Minister Senator <a href="https://www.foreignminister.gov.au/minister/penny-wong/speech/statement-asean-australia-ministerial-meeting.">Penny Wong</a> recently said the government’s policy was to deepen regional relationships, building a regional order in which all states can contribute to a strategic equilibrium “rather than be forced to choose sides”.</p>
<p>The Albanese government is also hoping its recent success in <a href="https://www.abc.net.au/news/2022-11-15/anthony-albanese-and-xi-jinping-meet-at-g20-summit/101657590">re-establishing diplomatic contact</a> with China will help ease China’s trade restrictions on Australian barley, wine and lobsters and contribute to regional stability.</p>
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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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</em>
</p>
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<p>But the US recently announced new <a href="https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3158-2022-10-07-bis-press-release-advanced-computing-and-semiconductor-manufacturing-controls-final/file.">trade restrictions</a> against China, including a ban on US exports associated with the manufacturing of computer chips, and <a href="https://www.theguardian.com/world/2022/oct/19/what-do-us-curbs-on-selling-microchips-to-china-mean-for-the-global-economy">secondary restrictions</a> on countries that export these products to China, including IPEF members South Korea and Singapore.</p>
<p>Singapore’s prime minister <a href="https://www.abc.net.au/news/2022-10-18/singapore-australia-china-beijing-lee-hsien-loong-albanese/101548248">Lee Hsien Loong</a> responded saying a further decoupling between the US and China could “result in less economic cooperation, less interdependency, less trust, and possibly, ultimately, a less stable world.”</p>
<p>The negotiations will present a challenge for the Albanese government’s policies on trade transparency, labour and environmental standards and regional stability.</p><img src="https://counter.theconversation.com/content/196122/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 (AFTINET)</span></em></p>The United States wants to use the negotiations to counter Chinese influence in the Indian and Pacific Oceans.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1628532021-06-16T07:57:50Z2021-06-16T07:57:50ZPolitics with Michelle Grattan: Acting PM Michael McCormack on net zero 2050 and prospects for a new coal-fired power station<p>With Scott Morrison overseas, Nationals leader Michael McCormack has been Acting Prime Minister this week. In this podcast, he speaks about the free trade agreement with the UK, climate change, coal, the Nationals, and China.</p>
<p>With speculation about whether Morrison will embrace a 2050 net zero target before the Glasgow climate conference, the attitude of the Nationals is critical and McCormack is under pressure from a vocal group in his party that is strongly against the target. </p>
<p>McCormack says the National party will not supporting signing up to the target this year.</p>
<p>When it is put to him, “we can be sure that the Nats would not embrace that target?” his reply is definite. “Correct”. </p>
<p>On coal, unlike many in the government, McCormack believes the controversial proposal for a coal-fired power station at Collinsville in Queensland can be a goer. A feasibility study is being conducted for the project. (It is understood a draft report has been produced already.) </p>
<p>McCormack says the study is “very much on its way”. Shire Energy CEO Ashley Dodd “texts me every day of every week and highlights the progress. And last week there were some really, really positive news.”</p>
<p>Asked whether he thinks the government will be able to support the project, McCormack says, “provided every box [including environmental ones] is ticked, yes”. </p>
<p>“If the proponents come forward with everything that they’re required to do, then I can see no reason why it wouldn’t be supported. And of course, it’s not just the federal government. It’s other entities, too, which need to come on board.” </p>
<h2>Transcript (edited for clarity)</h2>
<p><strong>Michelle Grattan:</strong> Michael McCormack, leader of the Nationals and deputy prime minister, is acting PM this week while Scott Morrison is overseas. </p>
<p>The Labor Party is relishing giving McCormack heat in question time. But McCormack himself seems to be equally relishing the limelight. And this week he had some good trade news to sell to farmers. Michael McCormack joins us today to talk about the Tamil family, the Australian-UK free trade agreement, climate change, coal and the Nationals. </p>
<p>Michael McCormack, can we start with the Biloela family? The government is taking quite a hard line, refusing to allow them to return to the town, which is in the National seat of Flynn. But your member for Flynn, Ken O'Dowd, supports the families return. Mr. O'Dowd is retiring at the election, would you expect your candidate next time round to say the family should be returned or to support the government’s line that they shouldn’t be? </p>
<p><strong>Michael McCormack:</strong> Well, Ken has done a marvellous job for Flynn, for Gladstone, Emerald and every other town in that electorate in central Queensland. But the next candidate for Flynn hasn’t been decided. The ultimately the person who will run for the LNP and sit with the National Party, hopefully after the next election has not been determined. And that will be up to that person. But what we’ve done as far as the Biloela family, every step of the way is stick to our clear and steadfast policy. And that is that if you came to Australia via an unauthorised vessel, then you would not be settled in this country. And we’ve stuck by that. And by sticking to that policy, which was made clear at the election when we returned to power in 2013 and continued at the subsequent elections in 2016, 2019, is that we’ve stopped the boats and that has saved lives. Now, under Labor’s watch, under those six years of labour from 2007 when they dismantled John Howard’s clear policy on boats and on illegal immigrants to 2013, when they finished government, Labor saw, sadly, 1,200 people lost at sea. Now we don’t want to go back to those bad dark days. We want to make sure that at every step of the way that people know our clear immigration policies and that if they do attempt to board a vessel via a people smuggler and try to get to Australia, then they will not be settled here. </p>
<p><strong>MG:</strong> Let’s move on to the free trade agreement, which was agreed in principle this week between Scott Morrison and Boris Johnson. Its got concessions and advantages for Australian farmers, but they do seem a long way off. A decade, at least 10 to 15 years for our beef and sheep meat exports. </p>
<p><strong>MM:</strong> Well, there’s immediate access for 35,000 tonnes tariff free for beef, 25,000 tonnes of sheep meat, 80,000 tonnes of sugar, 24,000 tonnes for dairy produce. This is a good outcome. And trade equals jobs. More trade equals more jobs. So we can look at those things. And as it’s also eight years for beef and sheep and 10 years for the sugar cane produce. And yes, there are elements that do go out to a further period. But this is a good outcome for Australian farmers and for Australians in general. Regional Australia has grown despite Covid-19 and despite every other thing that’s been thrown against it and agriculture has grown to a $66 billion enterprise, we want to make it $100 billion by 2030. Only by doing trade deals such as this are we going to realise that outcome. </p>
<p><strong>MG:</strong> In the talks that Scott Morrison has had with the British prime minister, climate change was, of course, one of the elements, and that’s been a theme of the G7 leaders. Now, your Senate leader, Bridget McKenzie, this week warned that it would be against the Nationals’ policy to sign up to net zero by 2050, to sign up to that firmly. What would be the Nationals’ position if the prime minister wants to embrace that target? </p>
<p><strong>MM:</strong> Well, we’re not going to sell our coal miners out, no way, shape or form, as Nationals. And nor is Scott Morrison. I was pleased to see overnight that Japan said individual countries should set their own targets and their own pathway to lower emissions. And Japan, of course, has 14 of its 53 power stations are coal-fired power stations. And so they’ve also set a clear pathway to continuing exports. And Australia is the best coal exports in the world. But Australia is not a signatory to the G7 plus or G7 communique. And Scott Morrison hasn’t signed away anything and nor would he. We’ve actually lowered our emissions by 20%, which is, from 2005 levels, which I haven’t seen those sorts of emissions being lowered to that extent, by the US, by Canada or many of those other countries that often make statements about climate, and so, you know, you look at our rooftop solar capacity, it is the highest take-up in the world. And so we’re doing our part, we’re meeting and beating our international obligations for 2030 big time. And we’ll continue to do that. And regional Australia will lead the way in that process. </p>
<p><strong>MG:</strong> So if I can just clarify this, the Nationals would not embrace the 2050 target as a firm commitment this year. </p>
<p><strong>MM:</strong> Well, how do we get there? That’s the question. Well, it’s technology, not taxes. That’s always been what we’ve said. And we’re not signing, we’re not signing up to anything. We’re not signing up to any international agreements, again, to see farmers and factories and households paying more for energy. </p>
<p><strong>MG:</strong> So we can be sure that the Nats would not embrace that target. </p>
<p><strong>MM:</strong> Correct. </p>
<p><strong>MG:</strong> Right. So, you mentioned coal, the study of a possible coal fired power station at Collinsville. That was set up, what, before the last election?</p>
<p><strong>MM:</strong> Part of the underwriting new generation investments. </p>
<p><strong>MG:</strong> Around the last election. Now, where is that up to? Is that finished? </p>
<p><strong>MM:</strong> Well, Ashley Dodd, who is the proponent of Shine Energy, which is the company that is exploring that possibility, they received some very good news last week. The business case is actually at the moment being reviewed. If it all stacks up, then I can’t see why you wouldn’t have such a facility in Gladstone, which needs the energy. Now Gladstone, I’m not sure whether, Michelle, you visited in more recent times, but it is booming and you’ve got so many companies looking to set up there. And looking to establish there and the port is expanding - it’s a very deep water harbour. We want to see Gladstone be its best self, we want to see it be the industrial manufacturing powerhouse of central Queensland, of the nation. But we’re not going to do it if we don’t have the power. So Shine Energy, forging on, they’re getting that help through that UNGI [Underwriting New Generation Investments] process. And measures are going well. </p>
<p><strong>MG:</strong> So that means the study is nearly finished or?</p>
<p><strong>MM:</strong> Very much on its way. Yes. And Ashley Dodd…</p>
<p><strong>MG:</strong> And you think…</p>
<p><strong>MM:</strong> Texts me every day of every week and highlights the progress. And last week there were some really, really positive news. He’s in a good frame of mind. Shine Energy, stand ready to to do what they need to do. But of course, it also needs to meet all the environmental implications. Yes, it does. And yes, it will. </p>
<p><strong>MG:</strong> So you think that the government will be able to support this enterprise. </p>
<p><strong>MM:</strong> Well, provided every box is ticked, yes. </p>
<p><strong>MG:</strong> But nevertheless, you get the feeling that Scott Morrison has now turned away from coal and he’s putting more emphasis on gas. You don’t think that times have just passed by the possibility of this project going ahead? </p>
<p><strong>MM:</strong> Well, there’s also diversification of the energy market. And we’ve always said that we believe in a range of energy options. Gas, yes, it’s a big part of it. I’m delighted that Keith Pitt has been so forward leaning with Beetaloo Basin and we’re supporting that project. Massive project, huge numbers of jobs, with the right road infrastructure, with the right amenities in that regard. In the Northern Territory, and even the, even the Gunner government which realises that this might be a way out of their economic malaise, and they’re in a bit of strife at the moment with debt. But this can only help that process of the Northern Territory government getting to some way back to where it needs to be and also addressing the energy needs and export requirements of this nation. </p>
<p><strong>MG:</strong> So just to be clear, on Collinsville, it is quite feasible you think that we could have a new coal fired power station there </p>
<p><strong>MM:</strong> If everything stacks up. Yes. If everything… Because that’s part of the UNGI process. That’s part of what we put in place prior to the 2019 election. And if the proponents come forward with everything that they’re required to do, then I can see no reason why it wouldn’t be supported. And of course, it’s not just the federal government. It’s other entities, too, which need to come on board. But this is a process that will be worked through. </p>
<p><strong>MG:</strong> Now, turning to China, obviously Australian farmers have taken quite a lot of the brunt of China’s ire with Australia generally because it’s their products that are running into obstacles. Do you have any concerns that Australia is going too far in its criticisms of China, so far that we’re really doing ourselves damage? </p>
<p><strong>MM:</strong> We trade a $149.6 billion with China. It’s our largest trading partner and I’ve been very, very careful with my comments around that, because what I don’t want to see is the barley grower in South Australia or Western Australia, the meat worker in a boning room in Casino, lose their job or lose their market because in some way, Beijing misinterpreted anything or any support that I have for our trade continuing. And it’s important. It’s important for our growers. It’s important for our workers. It’s important for our nation. That trade continues with China. Yes, I appreciate there are difficulties, but there are always difficulties in a, in a competitive market. And this is one of the reasons why we’re working through this process diligently, respectfully, pragmatically, practically, as you would expect. But that’s also why one of the reasons I’m pleased that Dan Tehan is working so hard to diversify our markets as well in the UK-Australia free trade agreement in principle is one of those recently, of course, opened up a trade arrangement with Indonesia that grew and expanded what we had before and 35,000 tonnes of barley going to Mexico for the very first time recently. That’ll help there. The beer production and everything else and indeed the sheep meat going to Saudi. These are important diversifications of our markets that are good. </p>
<p><strong>MG:</strong> But do you think we need to be more careful? The government needs to be more careful with its language about China? </p>
<p><strong>MM:</strong> We’ll always do and say what’s in Australia’s national interests first and foremost. </p>
<p><strong>MG:</strong> Do you think there’s any possible threat to iron ore exports? </p>
<p><strong>MM:</strong> I would like to think not, because Australia’s iron ore is the best in the world. </p>
<p><strong>MG:</strong> But what do you think? </p>
<p><strong>MM:</strong> Well, I mean, these are matters for others to decide. But I say again that the mills and the production processes in China need our metallurgical coal, need our iron ore. China knows that if it wants to build a better future, then Australia’s resources are one way to be able to enhance and provide that. </p>
<p><strong>MG:</strong> Now, just turning to the Nationals. These days, there always seems to be a good degree of angst in the Nationals - more than there used to be - at least in my memory. Is this mainly to do with issues or is it a question of personalities and ambitions? </p>
<p><strong>MM:</strong> Oh well, there’ll always be personalities and ambitions in Canberra. That’s why, that’s why the place is like it is. But I’m focused on making sure that our $110 billion of infrastructure is rolled out supporting 100,000 workers. I’m focused on making sure that the regions can get the best deal that they can get in every way, shape or form, whether it’s through infrastructure, whether it’s through water resources, whether it’s through agriculture. That’s my only focus. You’ll only ever get me commenting publicly and privately about the things that will be good for regional Australia. I’ll leave the politics to others if they so choose to go down that path. People out in regional Australia, particularly through Covid and particularly when they’re catching mice in greater numbers than they ever expected. People who are looking to the skies to see that the next shower is going to provide them with that subsoil moisture, to be able to give them hope when they’re planning a crop. They’re not worried. They’re not worried about the internal goings on, the machinations of a federal parliament. They want what’s best for them. And the bread and butter issues are my issues as well. Their concerns are my concerns. </p>
<p><strong>MG:</strong> Just finally, because we can hear the bells ringing…</p>
<p><strong>MM:</strong> I think that’s just the start of parliament, so a little bit of time…</p>
<p><strong>MG:</strong> For parliament to start. I just wonder what it feels like as acting prime minister, sitting in that question time hot seat, being peppered with questions which are well-outside your normal field of the questions you need to answer? </p>
<p><strong>MM:</strong> Funnily enough, it’s actually not because when you are the deputy prime minister, you get asked questions from every which way, every angle, every topic. When you’re out at a Bathurst roadside on the Great Western Highway, you’ll get questions about every topic under the sun. </p>
<p><strong>MG:</strong> Not so many people are listening, though. </p>
<p><strong>MM:</strong> Sure. And for those people who are listening to question time, I’m always amazed by the number of truckies who are listening in as they deliver the goods around the nation, and good on them, they they keep the wheels of the economy turning. </p>
<p><strong>MG:</strong> So what’s their feedback? </p>
<p><strong>MM:</strong> Good. Generally good. And question time is a cauldron. It’s a robust debating chamber. And you just have to have read your topic, know your topic, and but also show that you’re human. I don’t think people want politicians to be just reading from script all the time or just sticking to the, to the talking points, and I’ve never been like that, I’m always somebody who yes, you’ll see me as I am. I’m Michael from Marrar - little town with, tell you what, when I was when I was born and grew up there in the first four years that dad had the farm there, it had only a population of just over 100. How good is it that we have a nation where a little village of just over 100 people can produce somebody who can go on and be the acting prime minister? That gives hope to every boy and girl out there who ever aspired to open the batting for Australia in the cricket, to be a politician, to be the best nurse or doctor or engineer or scientist that they could be, that providing they work hard, providing they listen to their parents and their teachers and provided they have a bit of luck, you can be anything in this nation. </p>
<p><strong>MG:</strong> Also, you’re former journalists, of course. So… </p>
<p><strong>MM:</strong> I am, and what a great and noble profession that is! </p>
<p><strong>MG:</strong> You’ve seen the process from a different perspective. Michael McCormack, thank you very much for talking with the conversation today. We’ll let you get back to those briefs for the parliamentary day.</p>
<p><a href="https://itunes.apple.com/au/podcast/politics-with-michelle-grattan/id703425900?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL3BvbGl0aWNzLXdpdGgtbWljaGVsbGUtZ3JhdHRhbi5yc3M"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://www.stitcher.com/podcast/the-conversation-4/politics-with-michelle-grattan"><img src="https://images.theconversation.com/files/233716/original/file-20180827-75981-pdp50i.png" alt="Stitcher" width="300" height="88"></a> <a href="https://tunein.com/podcasts/News--Politics-Podcasts/Politics-with-Michelle-Grattan-p227852/"><img src="https://images.theconversation.com/files/233723/original/file-20180827-75984-f0y2gb.png" alt="Listen on TuneIn" width="318" height="125"></a></p>
<p><a href="https://radiopublic.com/politics-with-michelle-grattan-WRElBZ"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a> <a href="https://open.spotify.com/show/5NkaSQoUERalaLBQAqUOcC"><img src="https://images.theconversation.com/files/237984/original/file-20180925-149976-1ks72uy.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" width="268" height="82"></a> </p>
<h2>Additional audio</h2>
<p><a href="http://freemusicarchive.org/music/Lee_Rosevere/The_Big_Loop_-_FML_original_podcast_score/Lee_Rosevere_-_The_Big_Loop_-_FML_original_podcast_score_-_10_A_List_of_Ways_to_Die">A List of Ways to Die</a>, Lee Rosevere, from Free Music Archive.</p><img src="https://counter.theconversation.com/content/162853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan 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>Michelle Grattan discusses coal, the nationals, and China with Acting Prime Minister Michael McCormackMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1441962020-08-16T20:11:29Z2020-08-16T20:11:29ZLast to know: the EU knows more about our trade talks than we do<figure><img src="https://images.theconversation.com/files/352899/original/file-20200814-20-1tgqz3v.jpg?ixlib=rb-1.1.0&rect=222%2C251%2C2364%2C1056&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Mikhail Mishchenko/Shutterstock</span></span></figcaption></figure><p>In the negotiations for an <a href="https://www.dfat.gov.au/trade/agreements/negotiations/aeufta/Pages/default">Australia-European Union Free Trade Agreement</a> at present underway, the European Union is pushing for longer monopolies on medicines for its pharmaceutical companies.</p>
<p>If it gets them, Australians will wait longer for cheaper versions of those medicines.</p>
<p>It is important information, but we are only aware of it because (unlike Australia) the European Union <a href="http://trade.ec.europa.eu/doclib/docs/2018/july/tradoc_157190.pdf">publishes</a> its trade negotiating positions.</p>
<p>Ours have long been kept secret, even from us.</p>
<p>Next week the parliament’s Joint Standing Committee on Treaties will hold a <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Treaty-makingProcess/Public_Hearings">hearing</a> into whether we should change the system to make sure we know more.</p>
<p>The government itself commissioned the inquiry after the committee’s investigation into the Australia-Hong Kong and Indonesian free trade agreements <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/A-HKFTA/Report_186/section?id=committees%2freportjnt%2f024355%2f27910">recommended</a> it give</p>
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<p>due consideration to implementing a process through which independent modelling and analysis of a proposed trade agreement is undertaken in the future by the Productivity Commission or equivalent organisation</p>
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<p>At the moment the committee only gets to see trade agreements after they have been signed, meaning (literally) that the Australian people don’t get to know what their government is a bout to sign until after it has signed it.</p>
<h2>We don’t get to see what we are about to sign</h2>
<p>Afterwards, the parliamentary committee is effectively limited to saying yes to ratification (the final step after signing) or no. It can’t suggest changes to the text.</p>
<p>Nor can the parliament, which only gets to vote on the enabling legislation. Some parts of agreements, including some that constitute binding commitments, are <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/Treaty-making_process/Report">not included</a> in that legislation.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/352886/original/file-20200814-18-1fmk1z3.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>
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<span class="caption">No independent analyses of free trade treaties.</span>
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</figure>
<p>The committee’s recommendation follows <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/Treaty-making_process/Report">similar recommendations</a> by previous inquiries, and a plea by the <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements/report">Productivity Commission</a> for independent modelling of likely outcomes before negotiations begin, and and an independent public assessment of agreements after they are concluded, but before they are signed.</p>
<p>The Commission says the current arrangements lack transparency and tend to <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements/report">oversell the likely benefits</a>.</p>
<p>The so-called national interest analyses and regulatory impact statements prepared by negotiators are delivered after the agreements have been signed and so far have <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements/report">always recommended they be ratified</a>.</p>
<p>The agreements deal with <a href="https://theconversation.com/its-more-than-a-free-trade-agreement-but-what-exactly-have-australia-and-indonesia-signed-112853">more than trade</a>.</p>
<p>One reason is that Australia already has very low or zero tariffs. Negotiators from other countries need to obtain other concessions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/its-more-than-a-free-trade-agreement-but-what-exactly-have-australia-and-indonesia-signed-112853">It's more than a free trade agreement. But what exactly have Australia and Indonesia signed?</a>
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<p>The <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/tpp/Pages/tpp-text-and-associated-documents">Comprehensive and Progressive Trans-Pacific Partnership</a> ratified by Australia in 2018 has chapters dealing with the regulation of essential services such as medicines, education, aged care, childcare, energy, financial and digital services, as well as foreign investment, labour and environment regulations and government procurement and product standards.</p>
<p>The <a href="https://theconversation.com/planned-trade-deal-with-europe-could-keep-medicine-prices-too-high-102836">European Union</a>, <a href="https://theconversation.com/the-new-naftas-assault-on-public-health-116918">the United States</a> and <a href="https://theconversation.com/rcep-the-trade-agreement-youve-never-heard-of-but-should-be-concerned-about-42885">Japan</a> use the negotiations to fight for longer monopolies on medicines. Investors use them to obtain the right to <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">sue governments</a>; copyright owners use them to achieve <a href="https://theconversation.com/life-plus-70-who-really-benefits-from-copyrights-long-life-48971">longer copyright terms</a>.</p>
<h2>What’s needed?</h2>
<p>The committee could recommend that government table in parliament a document setting out its priorities and objectives at the start of each negotiation.</p>
<p>It could also recommend the release of <a href="http://trade.ec.europa.eu/doclib/docs/2018/july/tradoc_157190.pdf">updates</a> and negotiating texts, European Union style, and the release of the <a href="http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230">final text</a> of agreements before they are signed.</p>
<p>It could recommend an independent analysis of the costs and benefits of proposed agreements of the kind suggested by the Productivity Commission, both before signing, and also some years after signing to get an idea of whether they have lived up to their promise. </p>
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<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>
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<p>It could consider the health, environment and gender impacts, as well as the economic impacts.</p>
<p>And it could recommend that the parliament rather than the executive be given the role of agreeing to whole treaties, something legal experts say would <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Completed_Inquiries/jsct/ratification_bill/report/chapter3">permitted</a> by the Constitution.</p>
<p>These changes would give us a better idea of what’s being negotiated in our name.</p><img src="https://counter.theconversation.com/content/144196/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 is the Convener of the Australian Fair Trade and Investment Network.</span></em></p>Australia won’t let Australians see the Australia-EU deal before it is signed. The EU is publishing running updates.Patricia Ranald, Honorary research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1305442020-02-17T18:54:13Z2020-02-17T18:54:13ZOur trade talks with Europe and Britain are set to become climate talks<figure><img src="https://images.theconversation.com/files/315607/original/file-20200217-11040-15hbs6z.jpg?ixlib=rb-1.1.0&rect=858%2C305%2C2821%2C1681&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Foreign Minister Marise Payne meets UK Foreign Secretary Dominic Raab in Canberra on February 6.</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>Climate change is set to become an inescapable part of negotiations now underway over an <a href="https://dfat.gov.au/trade/agreements/negotiations/aeufta/Pages/default.aspx">Australia-European Union free trade agreement</a>, and also negotiations over the <a href="https://dfat.gov.au/trade/agreements/prospective/aukfta/Pages/australia-uk-fta.aspx">Australia-UK agreement</a> necessitated by Britain’s exit from the European Union. </p>
<p>Both agreements are needed to help shore up the world trading system which has been without an effective enforcement system following the decision of the Trump administration to <a href="https://theconversation.com/key-trade-rules-will-become-unenforceable-from-midnight-australia-should-be-worried-126768">withdraw support from the World Trade Organisation</a>. </p>
<p>In public, the major issue in the EU negotiations has been its determination to enforce so-called “<a href="https://dfat.gov.au/trade/agreements/negotiations/aeufta/public-objections-gis/Pages/list-of-european-union-geographic-indications-gis.aspx">geographical indications</a>”, which limit the use of common names for products such as “champagne”, “feta” and “prosecco” to products made in those places, over and against our access to the wealthy EU market.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/key-trade-rules-will-become-unenforceable-from-midnight-australia-should-be-worried-126768">Key trade rules will become unenforceable from midnight. Australia should be worried</a>
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<p>An agreement protecting the integrity of both French and Australian wine regions has been in place for more than 25 years. The EU wants to extend it to cheese, other foodstuffs and other beverages. </p>
<p>But it’s climate change that’s likely to be the biggest sticking point, with Australia appearing to drag its feet on its <a href="https://www.environment.gov.au/climate-change/publications/factsheet-australias-2030-climate-change-target">Paris commitments</a>, and our catastrophic bushfires drawing the world’s attention to our government’s record. </p>
<h2>Australia will be pressured on climate</h2>
<p>Britain will host this year’s <a href="https://sdg.iisd.org/events/2020-un-climate-change-conference-unfccc-cop-26/">United Nations Climate Change Conference</a>, in Glasgow in November.</p>
<p>The European Union is embracing climate action as a matter of policy, partly for environmental reasons and partly as an element of what it sees as economic sustainability. </p>
<p>In January, under the new leadership of Germany’s Ursula von der Leyen, the European Commission launched what it called the <a href="https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en">European Green Deal</a>. </p>
<p>It aims to make Europe carbon-neutral by 2050, committing to a trillion-Euro public-private fund to transitions away from carbon. Crucially, it embeds climate action into trade policy.</p>
<h2>We might face carbon border adjustments</h2>
<p>The most intriguing, and complex, proposal is for a “<a href="https://www.carbontax.org/issues/border-adjustments/">carbon border adjustment</a>” – a tax, levied on imports from countries without carbon pricing mechanisms. </p>
<p>The Commission also requires ratifying and effectively implementing the Paris Climate Accords as a precondition of trade agreements. </p>
<p>France has been especially bellicose on this point. In 2018, French President Emmanuel Macron pledged not to “sign commercial agreements” with nations that did not respect the Paris Agreement. </p>
<p>In November 2019 the French Foreign Minister insisted the Australia-Europe trade agreement include both ambitious climate targets and sanctions for failing meet them.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/arrogance-destroyed-the-world-trade-organisation-what-replaces-it-will-be-even-worse-125321">Arrogance destroyed the World Trade Organisation. What replaces it will be even worse</a>
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<p>In November, Trade Minister Simon Birmingham fobbed off the French demands, insisting that Australia would meet its targets without difficulty, a statement that might have said more about government messaging to a domestic audience than the state of progress.</p>
<p>Also complicating the talks is the requirement that once negotiations are concluded, the deal still needs the approval of the European Parliament. </p>
<h2>Europe wants enforceable commitments</h2>
<p>Left and Greens members have raised concerns already that the deal could result in increased Australian beef and sheep meat production which would boost methane emissions and emissions due to land clearing and transport.</p>
<p>Optimists in Europe see the negotiations as a way to get Australia to lift its environmental game. In an earlier round of negotiations, it reportedly pushed Australia on its poor fuel quality, labelling this a “<a href="https://www.theguardian.com/australia-news/2019/sep/02/eu-to-push-australia-to-clean-up-petrol-standards-as-part-of-free-trade-deal">technical barrier to trade</a>”. </p>
<p>Negotiations with Australia could turn into a test case for Europe’s climate strategy. Successfully holding Australia to account on its Paris commitments and turning it towards a sustainable economy would be a decisive statement for Europe’s ambitions to lead the world on the climate crisis.</p><img src="https://counter.theconversation.com/content/130544/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Wilson's research draws on a project funded under by a Jean Monnet Award from the EU's Erasmus Plus program. </span></em></p><p class="fine-print"><em><span>Chloe Ward's research draws on a project funded by a Jean Monnet Award from the European Union’s Erasmus Plus program. </span></em></p>Europe will insist on carbon commitments before agreeing to a deal.Bruce Wilson, Director of the European Union Centre, RMIT UniversityChloe Ward, Research officer, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1314632020-02-10T10:59:48Z2020-02-10T10:59:48ZJokowi’s visit shows the Australia-Indonesia relationship is strong, but faultlines remain<figure><img src="https://images.theconversation.com/files/314431/original/file-20200210-109891-9a8fqx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AAP/Rick Rycroft</span></span></figcaption></figure><p>Indonesian President Joko Widodo - Jokowi – has shown himself to be generally less interested in international affairs than his predecessor, Susilo Bambang Yudhoyono (SBY). He has also been less committed to the Indonesia-Australia relationship. </p>
<p>Nonetheless, Australia’s invitation to Jokowi to address the parliament, and his acceptance of that invitation, suggests the bilateral relationship is strong, at least at the governmental level.</p>
<p>Both Morrison and Jokowi referred in their parliamentary addresses to the fact this year marks the 70th anniversary of the establishment of diplomatic relations between Australia and Indonesia. Morrison reflected backwards, noting Australia had been an early supporter of Indonesian independence, and had been chosen by Indonesia to represent its interests on a UN committee involved with the Indonesia-Dutch dispute then underway.</p>
<p>Jokowi chose to look forward, to 2050 and the 100th anniversary of the start of diplomatic relations. He identified four major steps he suggested the two countries should take together to strengthen their bilateral relationship, and to contribute to regional peace and security.</p>
<p>Two of these steps were fairly predictable recitations of established policy.</p>
<p>The first was cooperation in furthering democracy, respect for human rights, counter-terrorism and anti-radicalisation strategies. He spoke against identity politics, disputing the idea it was cultural clashes that divided the world. Implementation of these principles remains fraught with difficulties, but the parameters of the problems are well-known in Jakarta and Canberra.</p>
<p>Second, Jokowi argued for free and fair trade, both bilaterally and regionally, in the face of increasing protectionism. Here he welcomed the conclusion of the <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/pages/indonesia-australia-comprehensive-economic-partnership-agreement.aspx">Indonesia Australia Comprehensive Economic Partnership Agreement</a>, which he described as opening opportunities for economic growth in both countries.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/its-more-than-a-free-trade-agreement-but-what-exactly-have-australia-and-indonesia-signed-112853">It's more than a free trade agreement. But what exactly have Australia and Indonesia signed?</a>
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<p>But there were two other steps Jokowi wanted the two countries to take, which were perhaps different from what might have been expected.</p>
<p>First, he called for collaboration on protection of the environment. Some of his remarks were predictable, such as protection of forests and rivers. But he also argued for collaboration on lowering carbon emissions and handling climate change. </p>
<p>Jokowi did not explain what he had in mind with joint action to lower carbon emissions, or managing climate change. Indonesia is a major exporter of coal, and annual forest fires have substantially reduced forest cover. Its political and business leaders are even more divided than those in Australia on climate-related issues and how to deal with them.</p>
<p>What Australia and Indonesia seem to share, it might cynically be suggested, is internal disagreement over the nature of the problem being faced, and steps that might be taken to address it. </p>
<p>Second, Jokowi called for Australia and Indonesia to be “anchors for development programs” in the Pacific region.</p>
<p>Like Australia, Indonesia has recently been paying increased attention to the nations of the South Pacific. Last October, it established the <a href="https://jakartaglobe.id/news/indonesia-launches-212m-international-development-aid-fund">Indonesian Agency for International Development</a>, with a focus on the South Pacific. Speaking at the launch of the agency, Indonesian Foreign Minister Retno Marsudi noted assistance had already been provided to Tuvalu, Nauru, Solomon Islands, Kiribati and Fiji, as well as Myanmar and the Philippines.</p>
<p>Australia’s renewed interest in the South Pacific is linked to the increased Chinese presence in the region. But Indonesia’s concern is less with China than with the status of its easternmost provinces of <a href="https://theconversation.com/how-the-world-failed-west-papua-in-its-campaign-for-independence-129623">West Papua</a> and Papua. The movement seeking the independence of this region from Indonesia has its <a href="https://www.theguardian.com/world/2018/oct/03/indonesia-accuses-vanuatu-of-inexcusable-support-for-west-papua">greatest support in the south Pacific</a>, particularly in Vanuatu, though support has also come from Tuvalu and the Marshall Islands.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/can-scott-morrison-deliver-on-climate-change-in-tuvalu-or-is-his-pacific-step-up-doomed-121501">Can Scott Morrison deliver on climate change in Tuvalu – or is his Pacific 'step up' doomed?</a>
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<p>Indonesia has <a href="https://www.channelnewsasia.com/news/asia/indonesia-aid-agency-fund-pacific-nations-papua-independence-12023670">formally denied the establishment of the agency</a> was aimed at countering international criticism of Indonesia’s position in Papua. But the suspicion there is a link will be hard to shake off.</p>
<p>Australia’s formal position on the Papuan provinces is made clear in the <a href="http://www.austlii.edu.au/au/other/dfat/treaties/2008/3.html">2006 Lombok Treaty</a>, which committed each party to supporting the territorial integrity of the other, and not providing support to separatist movements. There is, though, considerable support for Papuan separatism in the Australian community, reflected in the parliament particularly by the Greens. The Greens’ new leader, Adam Bandt, <a href="https://www.theguardian.com/australia-news/live/2020/feb/10/nationals-coalition-liberals-queensland-morrison-politics-live?page=with:block-5e40cc448f08e13324740425#block-5e40cc448f08e13324740425">is reported to have told Jokowi</a>, after his address: </p>
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<p>Thank you for your speech, thanks for your comments on climate change, now please get something done on West Papua.</p>
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<p>There is nothing new in the dilemma facing the Australian government on Papua, but the increased Indonesian focus on the Pacific region could well provide more opportunities for the two countries to differ than to work together effectively.</p>
<p>Finally, Jokowi’s speech was notable for what he did not say.</p>
<p>There was no mention of China’s increasingly activist foreign and defence policy position, especially in the South China Sea. However, given the issue was explicitly considered in the <a href="https://www.pm.gov.au/media/joint-statement-0">joint statement</a> of the two leaders, the president may have deemed that sufficient.</p>
<p>The other significant omission was any mention of easing conditions for the issuing of visas to Indonesians to visit Australia. This had been <a href="https://www.bloomberg.com/news/articles/2020-02-08/indonesia-s-jokowi-to-urge-visa-rule-easing-on-australia-visit">widely discussed in Indonesia</a> before the president left for Australia. Scott Morrison <a href="https://www.abc.net.au/news/2020-02-10/joko-widodo-indonesian-president-addresses-australian-parliament/11948604">did commit to reviewing the visa situation</a>, but Jokowi would be well advised not to hold his breath.</p><img src="https://counter.theconversation.com/content/131463/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Colin Brown is affiliated with the Australia Indonesia Business Council. This article does not reflect the views of the AIBC.</span></em></p>The Indonesian president outlined four major steps to improve the relationship, two of which were quite unexpected.Colin Brown, Adjunct Professor, Griffith Asia Institute, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1287352019-12-11T17:31:51Z2019-12-11T17:31:51ZUSMCA: The 3 most important changes in the new NAFTA and why they matter<figure><img src="https://images.theconversation.com/files/306386/original/file-20191211-95115-1lurugo.jpg?ixlib=rb-1.1.0&rect=10%2C10%2C2331%2C1408&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Leaders of the three countries signed the USMCA in November 2018.</span> <span class="attribution"><span class="source">AP Photo/Pablo Martinez Monsivais</span></span></figcaption></figure><p>President Donald Trump and Democratic leaders <a href="https://www.washingtonpost.com/business/2019/12/10/usmca-is-finally-done-deal-after-democrats-sign-off-heres-what-is-it/">agreed on a deal</a> to pass a new trade agreement between the U.S., Mexico and Canada that will update NAFTA. </p>
<p>Passing the new trade accord, known as the U.S.-Mexico-Canada Agreement, would be a substantial win for both Trump – given it’s one of <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-keeping-promise-renegotiate-nafta/">his campaign promises</a> – and Democrats, who <a href="https://www.bloomberg.com/news/articles/2019-12-11/pelosi-balances-impeachment-and-usmca-with-eye-on-2020-elections">want to show they’re legislating</a> even as they prepare to impeach the president. </p>
<p>So how is the USMCA different from the North American Free Trade Agreement, and why should you care? </p>
<p>Although the final revised text of the USMCA has not yet been released, the deal as <a href="https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between">detailed in May</a> contains numerous tweaks from its predecessor, both big and small. As an agriculture economist who studies trade, <a href="https://scholar.google.com/citations?user=rToS2UYAAAAJ&hl=en&oi=ao">I believe</a> three changes are especially noteworthy. </p>
<h2>Please pass the butter</h2>
<p>Since 1994, the U.S. and Canada <a href="https://ageconsearch.umn.edu/bitstream/16835/1/ag01fr01.pdf">have dropped tariffs</a> and other trade restrictions on most agricultural products. But there were a few exceptions, most notably dairy. </p>
<p>Dairy was a particularly problematic sticking point in year-long negotiations between the three countries. The <a href="https://accounts.wsj.com/auth/sso/login?code=Zt6os4RvG0AtL2ui&state=http%3A%2F%2Fwww.wsj.com%2Farticles%2Fwhy-milk-matters-in-u-s-canada-trade-feud-1535803200&savelogin=on">U.S.</a> and <a href="https://slate.com/business/2018/06/trumps-beef-with-canadas-dairy-industry-explained.html">Canada</a> both have long histories of protectionist policies, such as subsidizing dairy farmers and setting import quotas on milk. Canadian tariffs on some products can be as high as 300%. </p>
<p>The new USMCA <a href="https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states%E2%80%93mexico%E2%80%93canada-trade-fa-2">begins to change that</a>, representing a small but important win for both countries, especially the U.S. </p>
<p>Under the new accord, Canada <a href="https://www.cnn.com/2018/10/02/politics/usmca-canada-dairy/index.html">will curb some of the ways</a> it protects its dairy industry, such as allowing <a href="https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states%E2%80%93mexico%E2%80%93canada-trade-fact">more American milk, butter, cheese and other dairy products</a> to enter Canada duty-free, with reciprocal treatment for Canadian dairy exports to the U.S.</p>
<h2>Made in North America</h2>
<p>The new agreement also made big changes for auto manufacturers in hopes of ensuring more vehicles and parts are made in North America. </p>
<p>Starting as early as 2020, to qualify for zero tariffs when crossing borders, a car or truck must have <a href="https://www.washingtonpost.com/business/economy/us-and-canada-closing-in-on-a-new-nafta-deal-as-deadline-looms/2018/09/30/2ef72018-c50b-11e8-b1ed-1d2d65b86d0c_story.html">75%</a> of its components manufactured in Canada, the U.S. or Mexico, up from 62.5% currently.</p>
<p>Even more noteworthy, negotiators agreed to a new requirement that 40% to 45% of a vehicle’s components must be made by workers earning at least US$16 per hour, which is about <a href="https://www.washingtonpost.com/business/2018/10/01/us-canada-mexico-just-reached-sweeping-new-nafta-deal-heres-whats-it/">three times more</a> than the average wage currently earned by Mexican auto workers. </p>
<p>This change is huge, particularly for low-paid workers in Mexico. But it may lead to challenges over the enforcement of labor laws and increase the cost of cars made in all three countries. </p>
<h2>Keeping up with the times</h2>
<p>Society has experienced significant technological changes since NAFTA was implemented in 1994. Back then, the internet was still in its infancy, while smartphones and self-driving cars were barely imaginable.</p>
<p>That’s why <a href="https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states%E2%80%93mexico%E2%80%93canada-trade-fa-1">modernization</a> – updating rules and standards to keep up with the times – is a critical and positive update to the trade deal tying the North American continent together. </p>
<p>While NAFTA was the <a href="http://www.buildingipvalue.com/05_XB/052_055.htm">first trade treaty</a> to include intellectual property protections, the high pace of innovation has made modernization of its provisions imperative.</p>
<p>The new agreement <a href="https://www.washingtonpost.com/business/2018/10/01/us-canada-mexico-just-reached-sweeping-new-nafta-deal-heres-whats-it/?utm_term=.7be0c4624366">includes</a> stronger protections for patents and trademarks in areas such as biotech, financial services and domain names – all of which have advanced considerably over the past quarter-century. It also contains new provisions governing the expansion of digital trade and investment in innovative products and services. </p>
<p>Separately, negotiators agreed to update labor and environmental standards, which were not central to the 1994 accord and are now typical in modern trade agreements. Examples include enforcing a minimum wage for autoworkers, stricter environmental standards for Mexican trucks and new rules on fishing to protect marine life. </p>
<p>Apart from the changes, there is one important thing about the original NAFTA that will stay, thanks to the <a href="https://www.washingtonpost.com/business/2018/10/01/us-canada-mexico-just-reached-sweeping-new-nafta-deal-heres-whats-it/?utm_term=.15f9401acfa4">insistence</a> of Canada. Chapter 19 is the dispute settlement mechanism that allows countries to seek remedies for breaking the rules. It’s like “trade court” and makes it much easier to challenge another country’s policies.</p>
<p>Although Mexico’s Senate ratified the USMCA earlier this year, the deal still needed approval from Canada and the U.S. Congress. Democrats and <a href="https://www.politico.com/newsletters/morning-trade/2019/11/18/usmca-comes-down-to-labor-support-782542">labor unions insisted</a> on revisions to the text to address enforcement of labor and environmental provisions and intellectual property protection. The newly revised text agreed to by Trump and the Democrats addresses these issues and is now ready for approval by all three countries.</p>
<p>All in all, I believe the new NAFTA is definitely a modern and updated version of its important predecessor, which the U.S. Department of Agriculture <a href="https://www.fas.usda.gov/sites/development/files/nafta1.14.2008_0.pdf">characterized</a> as one of the most successful trade agreements in history. </p>
<p><em>This is an updated version of an <a href="https://theconversation.com/how-is-new-nafta-different-a-trade-expert-explains-104212">article originally published</a> on Oct. 2, 2018.</em></p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/128735/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amanda M. Countryman receives funding from the National Science Foundation and the U.S. Department of Agriculture. </span></em></p>President Trump and Democrats recently agreed on a deal to pass the U.S.-Mexico-Canada Agreement. A trade scholar explains what’s new.Amanda M. Countryman, Associate Professor of Agricultural Economics, Colorado State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1269182019-11-14T19:09:19Z2019-11-14T19:09:19ZVital Signs. Might straight down the middle be the source of our economic success?<figure><img src="https://images.theconversation.com/files/301696/original/file-20191114-77291-1az02dm.jpg?ixlib=rb-1.1.0&rect=920%2C559%2C1764%2C984&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australian roads are straight, as has been the trajectory of our economic policy for more than 30 years.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>What do a billionaire, a former vice president, and a US democratic socialist have to do with Australia’s nearly three-decade run of economic growth?</p>
<p>More than you might think.</p>
<p>The race for the Democratic Party’s 2020 Presidential nomination is far from over – in fact voting in the first state (Iowa) doesn’t even begin until January. But Senator Elizabeth Warren has become the front-runner in betting markets and national polls, pulling ahead of former vice president Joe Biden.</p>
<p>Warren is running on a “democratic socialist” platform of banning private health insurance, imposing a wealth tax and more rigorously examining proposed trade agreements. Biden is much more centrist – he was Barack Obama’s vice president after all – but he is struggling to maintain the lead he once held.</p>
<p>This has a number of people freaked out. Among them is former New York mayor (and former Republican) Mike Bloomberg, who has filed paperwork to get himself into the Democratic primary race.</p>
<p>Bloomberg is a pro-market, socially liberal, three-term mayor of New York. He amassed a US$50 billion fortune by creating the category-killing <a href="https://www.bloomberg.com/company/stories/understanding-bloomberg-and-the-terminal/">Bloomberg terminal</a> for financial data and securities trading. </p>
<p>He has taken progressive stands on gun control, gay rights and women’s reproductive rights. </p>
<p>And on climate change he spent half a billion dollars on climate mitigation projects as well as campaigning with the environment group <a href="https://www.sierraclub.org/">Sierra Club</a> (successfully) for coal mines to be closed. </p>
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Read more:
<a href="https://theconversation.com/vital-signs-the-battle-for-the-soul-of-the-us-democrats-thats-taking-place-before-our-eyes-121298">Vital Signs: the battle for the soul of the US Democrats that's taking place before our eyes</a>
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<p>Bloomberg’s path to the Democratic nomination is far from assured, but in Australia someone like him would be in the mould of prime ministers past.</p>
<p>And that tells us something important about our internationally unusual long run of economic growth.</p>
<h2>Straight down the middle</h2>
<p>Since Bill Hayden became Labor (and opposition) leader in 1977 and put to rest the economic upheaval of the Whitlam era, Australia’s two major political parties have maintained, for the most part, staunchly centrist economic policies. They’ve combined the virtues of markets with a strong social safety set.</p>
<p>The <a href="https://theconversation.com/hawke-was-our-larrikin-but-also-our-reformer-117308">Hawke-Keating government famously opened up the Australian economy</a> to the world: floating the Australian dollar, deregulating the banking system, slashing tariffs, and privatising sleepy state-owned enterprises.</p>
<p>John Howard not only continued this legacy but introduced the Goods and Services Tax – a much more efficient form of taxation than had existed – and successfully negotiated the <a href="https://dfat.gov.au/trade/agreements/in-force/ausfta/Pages/australia-united-states-fta.aspx">Australia-US Free Trade Agreement</a>. </p>
<p>And though the Rudd-Gillard-Rudd government may have lacked stability, it did not lack major economic achievements. </p>
<p>Rudd and then Treasury boss Ken Henry <a href="http://research.economics.unsw.edu.au/richardholden/assets/did-labor-really-save-us-from-the-gfc-we-ask-an-expert.pdf">acted decisively with stimulus and bank guarantees</a> to avoid the economic disaster that hit most of the rest of the world.</p>
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<a href="https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=986&fit=crop&dpr=1 600w, https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=986&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=986&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1239&fit=crop&dpr=1 754w, https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1239&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/301692/original/file-20191114-77315-1hc4e9a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1239&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">Total annual greenhouse gas emissions excluding emissions from land use, land use change and forestry.</span>
<span class="attribution"><a class="source" href="https://www.theguardian.com/business/grogonomics/2018/jan/09/australias-emissions-are-rising-its-time-for-this-government-to-quick-pretending">Greg Jericho, Guardian</a></span>
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<p>Gillard introduced a carbon tax that had an almost immediate effect in reducing Australia’s emissions.</p>
<p>While the Abbott-Turnbull-Morrison government’s stance on climate change has been rightly criticised (often by yours truly), it has continued to enact free trade agreements, the most recent of which, the <a href="https://dfat.gov.au/trade/agreements/negotiations/rcep/Pages/regional-comprehensive-economic-partnership.aspx">Regional Comprehensive Economic Partnership</a>, might be <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">truly transformational</a>.</p>
<h2>Sometimes veering to the sides</h2>
<p>Although that centrism has served Australia well socially and economically, there have been moments where policy looked like it would veer away from the centre.</p>
<p>Labor opposed the goods and services tax. The current government has flirted with government guarantees for new coal-fired power plants, which was a policy more in the spirit of Marx and Lenin than Howard and Costello.</p>
<h2>Holding the centre</h2>
<p>The current depressing state of the Australian economy (pun intended) might provide the biggest test yet to centrist economic policy. </p>
<p>Wage growth is sluggish (Wednesday’s figures showed annual growth slipping from a historically low <a href="https://www.smh.com.au/politics/federal/inextricably-linked-wage-growth-flatlines-as-report-shows-jobless-rate-hurting-economy-20191113-p53a94.html">2.3% to 2.2%</a>) and unemployment is climbing (Thursday’s figures showed the unemployment rate climbing from <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6202.0Main%20Features1Oct%202019?opendocument&tabname=Summary&prodno=6202.0&issue=Oct%202019&num=&view=">5.2% to 5.3%</a>).</p>
<p>There’s pressure from both the left and the right to “do something”.</p>
<p>Cutting immigration, moving away from free trade, propping up failing industries, or offering selective wage rises to particular sectors (such as childcare workers) are among the “somethings” that have been on the table or partially implemented.</p>
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Read more:
<a href="https://theconversation.com/if-you-think-less-immigration-will-solve-australias-problems-youre-wrong-but-neither-will-more-115136">If you think less immigration will solve Australia's problems, you're wrong; but neither will more</a>
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<p>The Hawke-Keating and Howard-Costello governments sustained centrist economic policy for more than two decades. </p>
<p>They did it not only through a series of sound policy choices, but also through a narrative about the virtues of markets coupled with a social safety net.</p>
<p>It’s a narrative under threat. In Australia it hasn’t been drowned out yet.</p><img src="https://counter.theconversation.com/content/126918/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden 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 secret weapon has been faith in market outcomes combined with a strong social safety set.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1253992019-10-18T11:25:06Z2019-10-18T11:25:06ZTrump is flouting global trade rules with China yet embracing them with the EU – here’s why it matters<p>Just as America’s trade war with China may be winding down, its troubles with Europe seem to be growing. </p>
<p>On Oct. 11, President Donald Trump <a href="https://www.bloomberg.com/news/articles/2019-10-11/u-s-china-said-to-reach-partial-deal-could-set-up-trade-truce-k1melw60">said that the United States and China had agreed</a>, in principle, to “phase one” of a trade deal. Although the details are murky, the deal appears to suggest small wins for both sides and a cessation – for now – in tariff escalation. </p>
<p>Three days later, the <a href="https://fortune.com/2019/10/14/us-eu-trade-war-airbus-vs-boeing-wto-gives-okay-us-7-5-billion-eu-import-tariffs/">U.S. imposed US$7.5 billion of sanctions</a> on European Union products – such as Scotch whiskey and French cheese – to protest the EU’s subsidies of aviation giant Airbus. </p>
<p>But there is one notable difference between these two conflicts. </p>
<p>Trump has been managing the dispute with China largely outside the international legal framework regulating trade. Though he has employed various justifications for his actions, <a href="https://www.cnbc.com/video/2019/05/15/american-tariffs-on-chinese-goods-are-illegal-former-wto-official.html">many experts agree</a> that they violate international law. By contrast, Trump’s European tariffs were sanctioned by the World Trade Organization. They are thus indisputably legal.</p>
<p>As a <a href="https://scholar.google.com/citations?user=Y58-EhUAAAAJ&hl=en&oi=ao">scholar of trade policy</a>, these two simultaneous moves – one outside international law and the other inside it – fascinate me. They show that Trump’s approach to trade is not so much anti-establishment as it is opportunistic. </p>
<h2>A tale of two trade talks</h2>
<p>The deal with China, which that country hasn’t yet formally endorsed, <a href="https://www.nytimes.com/2019/10/15/business/economy/china-trade-deal.html">appears to include</a> a promise by Beijing to purchase up to $50 billion of additional U.S. agricultural products and to revisit its foreign investment and intellectual property laws. </p>
<p>In return, the White House has suspended the imposition of its threatened tariff hikes, which had been due to take place on Oct. 15. </p>
<p>Trump claims to have achieved more success with his aggressive stance during the 18-month trade war than prior presidents could boast when playing by the rules. It is ironic, then, that his trade sanctions against Europe resulted from <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/october/us-wins-75-billion-award-airbus">over a decade of work</a> by previous administrations and stuck to the book.</p>
<p>The United States has long maintained that European countries subsidize Airbus, while the European Union has claimed that Washington uses defense spending to do the same for Boeing. The EU may soon get permission from the WTO to impose its own trade sanctions on U.S. products if that case goes the way <a href="https://theweek.com/articles/870915/trumps-trade-war-takes-eu">it is expected to</a>. </p>
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<img alt="" src="https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297587/original/file-20191017-156314-1899fzj.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">U.S. President Donald Trump shakes hands with Chinese Vice Premier Liu He.</span>
<span class="attribution"><span class="source">AP Photo/Andrew Harnik</span></span>
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<h2>‘Forum shopping’</h2>
<p>So why is the U.S. following the rules in one case but flouting them in another? Put simply, I believe Trump is “forum shopping.” </p>
<p>Forum shopping is a term coined by <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1758-5899.2012.00195.x">international relations theorists</a> to explain why countries use varying international organizations, or none at all, to conclude similar deals. In all sorts of policy areas, <a href="https://georgetown.app.box.com/s/m4xk4tjq0plr63kn2ntukx491xuyks87">these theorists argue</a>, states will choose to negotiate in forums that they believe will stack the odds in their favor. </p>
<p>That’s why the U.S. chose to work within the rules on Europe – it knew they were on its side – but beyond them in dealing with China.</p>
<p>In the Europe dispute, the issue is quite definable: The EU’s Airbus subsidies <a href="https://www.nytimes.com/2019/10/02/us/politics/airbus-tariffs-wto.html">are a likely violation</a> of global trade rules. </p>
<p>For this reason, the administration has evidently concluded that the smart approach is to follow through with the legal process. </p>
<p>The China dispute is different. It encompasses a wide range of issues – from intellectual property theft to currency manipulation – that would be difficult to adjudicate comprehensively. More to the point, the key Trump complaint – the <a href="https://www.brookings.edu/wp-content/uploads/2019/02/us_china_economic_relationship.pdf">trade imbalance</a> – is not in itself even a violation of international trade law. </p>
<p>The legal route would have taken a long time and may well have gone nowhere. Given Trump’s political need to confront China, such an approach was too risky to consider.</p>
<h2>Long-term consequences</h2>
<p>But forum shopping has costs. </p>
<p>When even the principal architect of the international trading rules – the United States – only appeals to those rules in search of its own interests, <a href="https://www.theglobeandmail.com/opinion/whither-the-rule-of-law/article33953502/">the system’s legitimacy</a> is eroded. </p>
<p>Why should Americans care?</p>
<p>There is a reason that the development of an international trading system has been backed by Washington for seven decades – it is extremely useful. </p>
<p>Having a level playing field in trade, based on clear rules, open information and non-discrimination <a href="https://www.thebalance.com/globalization-and-its-impact-on-economic-growth-1978843">has played a key role</a> in American, and global, economic growth. It has also encouraged interdependence and <a href="https://theconversation.com/trumps-one-on-one-approach-to-china-has-dangerous-implications-for-global-trade-and-world-peace-116505">reduced conflict</a>. Chucking that system for a quick result as Trump has done in the case of China is a mistake.</p>
<p>Ultimately, for legal norms to function, I believe leading players like the U.S., China and the EU must all adopt a more enlightened, long-term view of their interests. They must be willing to recognize the authority of international rules even if they are tempted to ignore them in individual cases.</p>
<p>Let’s hope that future presidents will take a broader view and recognize America’s interests in a rule-based, cooperative international system, both in the trade arena and beyond.</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/125399/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>The Trump administration’s tendency to follow rules only if they’re in its interest could end up hurting the US in the long run.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1183132019-06-04T21:13:52Z2019-06-04T21:13:52ZTrump’s Mexico tariffs don’t make sense, but Americans will pay a steep price anyway if they go into effect<figure><img src="https://images.theconversation.com/files/277984/original/file-20190604-69051-hue4dh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mexican avocados may soon be more expensive in American supermarkets.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Amazon-Whole-Foods-Shoppers/b4e9f25301294abfb89c0d0edb8b40d5/11/0">AP Photo/Mark Lennihan</a></span></figcaption></figure><p>The <a href="https://www.washingtonpost.com/world/the_americas/mexico-sees-80-percent-chance-of-a-deal-to-head-off-trump-tariffs/2019/06/04/53bdce08-86c4-11e9-98c1-e945ae5db8fb_story.html">Trump administration says it intends</a> to slap a 5% tariff on <a href="https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/mex/usa/show/2017/">every medium-sized car, avocado and other Mexican import</a> beginning June 10 – all <a href="https://www.nytimes.com/2019/04/01/us/politics/trump-border-closing-economy.html">almost US$1 billion worth</a> that crosses the border into the U.S. each day on average. </p>
<p>The president is using the policy as a cudgel to compel Mexico to do more to stem the flow of migrants into the U.S. and says he’ll increase the tariff if things don’t improve. As a <a href="https://scholar.google.com/citations?user=vf1UpqAAAAAJ&hl=en&oi=ao">scholar who studies trade policy</a>, I have a hard time agreeing with the president’s strategy that tariffs can be used as a stick to pressure another country to do whatever he wants. </p>
<p>More than that, Americans will pay the price – as they have with <a href="https://www.nytimes.com/2019/05/16/podcasts/the-daily/trump-tariffs-china-trade-war.html">Trump’s U.S.-China trade war</a>. </p>
<h2>Driving up costs to consumers and businesses</h2>
<p>Tariffs, which are a tax imposed on imports paid by consumers in the recipient country, are typically used as a protectionist measure. </p>
<p>That is, governments use them to promote domestic goods in the face of global competition. For instance, if a domestically made item costs less than a foreign made item – due to tariffs increasing the price – trade scholars would expect a consumer to choose the less expensive, domestic item. </p>
<p>This would make sense in an economy where consumers have actual choices about whether to buy a foreign or domestic product. However, due to the evolving global economy, most consumer goods are made abroad or <a href="https://www.uschamber.com/series/above-the-fold/global-supply-chains-big-win-consumers-us-businesses">contain foreign parts</a>. <a href="https://money.cnn.com/2018/07/02/news/companies/auto-tariffs/index.html">All “U.S.-made” cars</a>, for examples, contain foreign parts. And <a href="https://muse.jhu.edu/article/705963/summary">my research has shown</a> that it is not easy to understand how “foreign” a product is. </p>
<p>One good example is avocados. Mexico <a href="https://www.live5news.com/2019/06/02/mexican-avocado-growers-expect-us-consumers-bear-tariffs/">produces 11</a> for every 1 grown in California, and demand is unlikely to diminish for avocado toasts and guacamole, so Americans will simply have to pay more. </p>
<p>The long and short of it is that a 5% tariff on all imports from Mexico will drive up costs to American consumers and businesses by almost the entire amount, meaning using them to solve a very different border security issue will be very painful. </p>
<h2>Killing the USMCA</h2>
<p>It is also quite confusing to place tariffs against Mexico. </p>
<p>Just six months ago, the U.S, Canada and Mexico <a href="https://theconversation.com/us/topics/usmca-60377">finished negotiating a massive trade deal</a> to replace the often-reviled North American Free Trade Agreement. Although the deal has been signed by leaders of each country, it has not yet been ratified by the U.S. Congress. </p>
<p>President Donald Trump, who <a href="http://fortune.com/2016/09/27/presidential-debate-nafta-agreement/">has frequently blasted NAFTA</a> and <a href="https://www.npr.org/2018/11/30/672150010/usmca-trump-signs-new-trade-agreement-with-mexico-and-canada">trumpeted</a> its replacement, now risks seeing his U.S., Mexico, Canada Agreement torpedoed. House Democrats <a href="https://www.wsj.com/articles/trumps-new-nafta-faces-mounting-resistance-in-democratic-house-11556493604">were already on the fence</a> about whether to ratify it and may use his tariff threats against Mexico over immigration as another reason to vote it down – or to get an immigration deal more to their liking. </p>
<p>And Mexico, which also has yet to ratify the USMCA, is also talking about retaliation against any tariffs Trump imposes, including <a href="https://www.wsj.com/articles/trumps-top-trade-adviser-opposed-mexican-tariffs-11559320692">rejecting</a> the negotiated accord. Tearing up the deal could cause <a href="https://www.fxstreet.com/news/us-potential-effects-if-congress-rejects-the-usmca-wells-fargo-201904151731">economic turmoil</a> for the U.S., particularly as Mexico is the <a href="https://ustr.gov/countries-regions/americas/mexico">second-largest export market</a> for U.S. goods.</p>
<p>All in all, <a href="https://piie.com/commentary/testimonies/evidence-costs-and-benefits-economic-sanctions">academic research has shown</a> economic sanctions, including tariffs, aren’t an effective way to conduct foreign policy. Unfortunately, they seem to have become the Trump administration’s go-to strategy when it doesn’t get its way.</p><img src="https://counter.theconversation.com/content/118313/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christina Fattore 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 plans to put a 5% tariff on every Mexican good that crosses the border unless Mexico does more to reduce the flow of migrants.Christina Fattore, Associate Professor of Political Science, West Virginia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1165052019-05-07T11:22:28Z2019-05-07T11:22:28ZTrump’s one-on-one approach to China has dangerous implications for global trade and world peace<p>Not too long ago, President Donald Trump <a href="https://www.bloomberg.com/news/articles/2019-05-05/u-s-china-trade-deal-talks-enter-endgame-global-economy-week">seemed to be on the cusp</a> of a trade deal with China. A <a href="https://twitter.com/realDonaldTrump/status/1125069836088950784?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1125069836088950784&ref_url=https%3A%2F%2Fwww.nytimes.com%2F2019%2F05%2F06%2Fbusiness%2Fchina-trump-trade-economy-markets.html">couple of threatening tweets</a> and an <a href="https://www.cnn.com/2019/05/10/business/china-us-tariffs-trade/index.html">escalation of tariffs</a> later, the odds of ending the <a href="https://www.nytimes.com/interactive/2018/07/11/business/trade-war.html">16-month-old U.S.-China trade war</a> anytime soon have dropped dramatically. </p>
<p>Whether or not American and Chinese trade negotiators ultimately salvage a deal – <a href="https://www.cnbc.com/2019/05/10/us-china-trade-talks-to-continue-on-friday-white-house-says.html">they are still planning to meet</a> in the coming days – the episode highlights drawbacks in Trump’s trade strategy, which tends to be protectionist, confrontational and negotiated one on one. </p>
<p>Unfortunately, Trump’s policies are only an acceleration of a trend in international trade that’s been going on for several decades. It’s a move away from multilateralism – in which many countries agree on certain trading principles – and toward bilateralism – which pits nation against nation, raising the stakes. </p>
<p>I am a <a href="https://shared.cas.gsu.edu/profile/charles-hankla-2-2/">specialist in the politics of trade</a>. My observations lead me to believe that the increasing abandonment of multilateralism will have pernicious long-term consequences. Not only will trade become more costly for businesses and consumers, it may even make the planet a more dangerous place. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1125069836088950784"}"></div></p>
<h2>World trade – Trump style</h2>
<p>Before we can understand what has changed, we need to revisit how trade deals have historically been done.</p>
<p>In the decades following World War II, the General Agreement on Tariffs and Trade was <a href="https://www.amazon.com/Evolution-Trade-Regime-Politics-Economics-ebook/dp/B004LE84FY/ref=sr_1_6?keywords=international+trade+goldstein&qid=1557085460&s=books&sr=1-6">the center of gravity for trade negotiations</a>. While that system wasn’t perfect, most of the world’s countries could at least participate, to one degree or another, in hammering out the rules of trade. </p>
<p>This multilateral trading order reached its heyday in 1995, with the creation of the <a href="https://www.oxfordscholarship.com/view/10.1093/019829431X.001.0001/acprof-9780198294313">World Trade Organization</a>. But more recently, the system has weakened. Today, most of the world’s new agreements are struck between <a href="https://www.researchgate.net/publication/230595087_From_Multilateralism_to_Bilateralism_The_Impact_of_Free_Trade_Agreements_On_Global_Trade_Policies">only two countries or within a single region</a>.</p>
<p>Trump has shown <a href="https://www.bbc.com/news/world-us-canada-45364150">little appetite</a> for continuing the <a href="https://www.economist.com/unknown/2002/11/29/can-america-kickstart-the-doha-round">multilateral negotiations</a> his <a href="https://www.washingtonpost.com/business/economy/from-a-skeptical-beginning-obama-has-set-a-global-round-of-trade-talks-in-motion/2013/03/08/1a4af06a-85e5-11e2-9d71-f0feafdd1394_story.html?utm_term=.ad596b213320">predecessors were working on</a>. He’s also hammered on regional accords, famously renegotiating the <a href="https://www.politico.com/story/2018/09/26/trump-canada-nafta-trade-845350">North American Free Trade Agreement</a> and <a href="https://theconversation.com/what-is-the-tpp-and-can-the-us-get-back-in-95028">withdrawing from</a> the Trans-Pacific Partnership.</p>
<p>Trump’s clear preference is for bilateral deals where the U.S. can use its market power to force concessions from its negotiating partners. But Trump has added a level of confrontation and antagonism to world trade not known in the postwar era. </p>
<p>For evidence, look no further than <a href="https://www.nytimes.com/2019/05/05/business/trump-tariffs-china-trade-talks.html?action=click&module=Top%20Stories&pgtype=Homepage">his use of threats</a> during the recent trade talks and his decision to raise tariffs on hundreds of billions of dollars of Chinese goods on May 10, which is expected to prompt retaliation from China.</p>
<p>In essence, the United States under Trump has begun to see itself as the victim, rather than the guarantor, of the liberal trading order. This new perspective has made American negotiators more willing to extract temporary concessions from trading partners, even when these come at the cost of destabilizing the system as a whole.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/272842/original/file-20190506-103082-3pxoue.gif?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">Chinese Vice Premier Liu He, right, and U.S. Treasury Secretary Steven Mnuchin seemed to be close to a deal in early May.</span>
<span class="attribution"><span class="source">AP Photo/Andy Wong</span></span>
</figcaption>
</figure>
<h2>Rules upon rules</h2>
<p>One pernicious consequence of abandoning multilateralism is the mounting complexity and discriminatory nature of global trading arrangements. </p>
<p>In international trade, the fewer rules there are the better. One real benefit of the WTO system is that the same rules, more or less, apply to everyone. </p>
<p>But the world’s increasing rejection of multilateralism is creating a complex web of trade regulations that are tremendously hard to navigate. The number of preferential trade agreements <a href="https://www.nber.org/papers/w22138.pdf">jumped from just over 50 in 1990</a> to nearly 300 in 2010.</p>
<p>More deals like these mean that one set of rules is overlaid by more rules that only apply when trading with specific countries in certain goods and services. For this reason, the economist Jagdish Bhagwati has called bilateral deals “<a href="https://www.cfr.org/book/termites-trading-system">termites in the trading system</a>.” </p>
<p>These “termites” and the informational burdens they create have real costs for companies and consumers, whether in Europe, Asia or the United States. And this growing complexity weakens competition by <a href="https://www.doi.org/10.1177/0022002713516844">giving certain companies an edge over others</a> based on their national origin, distorting the efficiency of global markets. </p>
<p>In the end, these burdens can discourage smaller companies from engaging in global commerce, make it more expensive for even the largest businesses and drive up the cost of products for consumers. </p>
<h2>Trade conflicts</h2>
<p>A second drawback to Trump’s approach is that it increases the risk of war, at least over the long term. </p>
<p>As the political economist David Lake <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2018/08/24/worried-about-tariffs-trade-blocs-are-the-real-danger-to-the-u-s-and-china/?utm_term=.656d9e1aa64f">has pointed out</a>, one purpose of the trading system that the U.S. helped set up after World War II was to forestall mutually antagonistic trading blocs like the ones built by Adolf Hitler or, earlier, by the European and Japanese colonial powers. </p>
<p>The origins of the two world wars may have been principally political, but there is little doubt that economic conflicts between blocs <a href="https://history.state.gov/milestones/1937-1945/pearl-harbor">contributed to the military tensions</a>.</p>
<p>During the postwar era, the multilateral system took a major step toward insulating trade from such international disputes and strategic competition. Outside of relations with the communist bloc, which <a href="https://www.latimes.com/archives/la-xpm-1986-08-25-me-16126-story.html">only later</a> participated in multilateral trade deals, there is <a href="https://journals.sagepub.com/doi/10.1177/0022343396033001002">ample reason to believe</a> that economic interdependence helped produce the “long peace” of that period.</p>
<p>For this reason, we should all be worried about the wobbly state of the global trading system. Bilateral and regional deals are making it easier for large countries to use trade policy more explicitly as an arm of foreign and military policy. </p>
<p>Modern bilateral deals are not recreating the colonial systems of the past, but they do tend to center on major powers in what some scholars have called a <a href="https://books.google.com/books?hl=en&lr=&id=I6cSDAAAQBAJ&oi=fnd&pg=PA51&dq=preferential+trade+agreements+hub+spoke&ots=YhhBMVZd3r&sig=dFM6O-5hFgUnva96No4Q1Z-U3Dg#v=onepage&q=preferential%20trade%20agreements%20hub%20spoke&f=false">“hub”</a> and <a href="https://www.econstor.eu/handle/10419/109287">“spoke”</a> pattern. The “hub” often enjoys significant influence over the “spoke,” and not just in commercial affairs. <a href="http://www.chinadaily.com.cn/a/201809/04/WS5b8dbd97a310add14f3895cd.html">China’s overtures to African countries</a> over a free trade deal, for example, are likely linked to its strategic interest in securing access to national resources.</p>
<p>While I’m not suggesting that these deals are likely to trigger a shooting war anytime soon, an increasingly fractured world will gradually reduce interdependence among countries – which can act as a strong incentive to avoid a fight. </p>
<p>If the rising number of bilateral deals become an instrument of security policy, and trade increasingly flows only to strategically friendly countries, we should all prepare for more violent conflict in the future.</p><img src="https://counter.theconversation.com/content/116505/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 embrace of bilateralism in trade relations has pernicious long-term consequences, including ratcheting up the odds of violent conflict.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1134402019-04-12T02:06:02Z2019-04-12T02:06:02ZAmerica and the world still need the WTO to keep trade and the global economy humming<figure><img src="https://images.theconversation.com/files/268892/original/file-20190411-44781-1lxc2b4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The WTO's home in Geneva.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/geneva-august-18-world-trade-organization-150489857?src=Ohp3Q9anSM6lue2OrPqqTg-2-68">Martin Good/Shutterstock.com</a></span></figcaption></figure><p>President Donald Trump <a href="https://piie.com/blogs/trade-investment-policy-watch/us-exit-wto-would-unravel-global-trade">has made no secret</a> of his disdain for the World Trade Organization.</p>
<p>Since taking office, the Trump administration <a href="https://www.reuters.com/article/us-usa-trade-wto-judge/world-trades-top-court-close-to-breakdown-as-us-blocks-another-judge-idUSKCN1M621Y">has been blocking the appointment</a> or reappointment of WTO judges – imperiling the essential work of its court in issuing trade rulings. The president has <a href="https://www.bbc.com/news/world-us-canada-45364150">even threatened</a> to leave the global body if it doesn’t “shape up.” </p>
<p>But what exactly is the WTO, why does it matter and should Americans care if the U.S. left it? </p>
<p>As an international trade <a href="https://scholar.google.com/citations?user=yNkGbyQAAAAJ&hl=en&oi=ao">scholar</a>, I believe the WTO matters a great deal. To show why, I’d like to start with the history, which begins long before the agreement establishing the WTO <a href="https://www.wto.org/english/docs_e/legal_e/marrakesh_decl_e.htm">was signed</a> 25 years ago, on April 15, 1994.</p>
<h2>History of the WTO</h2>
<p>The <a href="https://www.wto.org">Geneva-based WTO</a> was the culmination of a <a href="https://theconversation.com/rules-based-trade-made-the-world-rich-trumps-policies-may-make-it-poorer-97896">50-year effort</a> spearheaded by successive U.S. governments to establish and secure a rules-based multilateral trade regime.</p>
<p>Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This <a href="http://www.press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html">also contributed</a> to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.</p>
<p>The 1948 <a href="https://www.investopedia.com/terms/g/gatt.asp">General Agreement on Tariffs and Trade</a>, the WTO’s predecessor, was designed to avoid a repeat of the collapse of trade in the 1930s that <a href="https://www.ucpress.edu/book/9780520275850/the-world-in-depression-1929-1939">worsened the Great Depression</a> and to eliminate market access as a reason to go to war. But this agreement applied only to trade in goods, not services. </p>
<p>Efforts to forge a <a href="https://www.wto.org/english/theWTO_e/minist_e/min96_e/chrono.htm">more comprehensive trade treaty</a> didn’t succeed until the 1990s, following the so-called Uruguay Round of trade talks, which ultimately led to the creation of the WTO on Jan. 1, 1995.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/266581/original/file-20190329-71016-s1vedx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The WTO’s creation was a significant accomplishment of the Clinton administration.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Watchf-AP-A-DC-USA-APHS352110-President-Bill-Cl-/6b2b47ed07674cd28d0fe9fda02f0b14/9/0">AP Photo/Greg Gibson</a></span>
</figcaption>
</figure>
<h2>A success story</h2>
<p>The result has been spectacularly successful. <a href="https://comtrade.un.org/pb/">Country exports</a> as a share of global output surged from less than 5% in 1948 to over 30% today.</p>
<p>This enabled countries to <a href="https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi03_e.htm">grow faster and steadier</a> and brought peace and prosperity to Europe and Japan. </p>
<p>Members of the WTO, which currently number 164, agree to four core principles: </p>
<ol>
<li><p>Nondiscrimination, which means all imports are subject to the same tariff rate, with some exceptions;</p></li>
<li><p>Reciprocity, which balances the reduction of barriers and allows for retaliation; </p></li>
<li><p>Transparency;</p></li>
<li><p>Decision-making by consensus.</p></li>
</ol>
<h2>How it works</h2>
<p>The WTO facilitates trade negotiations among member countries to open up markets and <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">settle disputes</a> that arise. </p>
<p><a href="https://www.wto.org/english/tratop_e/dda_e/dda_e.htm">Subsequent rounds of negotiations</a> have allowed countries to take big steps toward trade liberalization, while balancing concessions with benefits. </p>
<p>When disputes arise, such as the <a href="https://theconversation.com/george-w-bush-tried-steel-tariffs-it-didnt-work-92904">Trump steel tariffs</a>, impartial panels adjudicate using WTO rules and permit injured countries to sanction violators. The U.S. <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">ranks among the most frequent</a> and successful users of this, which has helped keep markets open for American exporters.</p>
<h2>What would happen if the U.S. left</h2>
<p>If the U.S. were to leave the WTO, other countries could freely raise tariffs against it. And the U.S. would lose access to the dispute settlement mechanism, which would make retaliation the only response available. </p>
<p>This would inevitably raise prices and reduce choice for U.S. consumers, undercutting the competitiveness and profitability of companies that rely on imports and slow economic growth.</p>
<p>The WTO’s demise would also raise the odds of violent conflict among states because it would reduce opportunities for peaceful economic expansion.</p>
<p>I know the WTO is far from perfect. Its reliance on consensus decision-making at times hampers progress on pressing problems, and its dispute settlement process can be slow. </p>
<p>That said, the WTO remains one of today’s most valuable international organizations, and I believe the world would be poorer and less peaceful without it.</p>
<p><em>This is an updated version of an <a href="https://theconversation.com/what-is-the-wto-99274">article</a> originally published on July 3, 2018.</em></p><img src="https://counter.theconversation.com/content/113440/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen J. Silvia 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>A quarter-century ago, more than 100 nations agreed to engage in freer trade with one another and signed the declaration that established the World Trade Organization.Stephen J. Silvia, Professor of International Relations, American University School of International ServiceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1128532019-03-05T19:06:16Z2019-03-05T19:06:16ZIt’s more than a free trade agreement. But what exactly have Australia and Indonesia signed?<figure><img src="https://images.theconversation.com/files/262101/original/file-20190305-48438-168142a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Simon Birmingham and Enggartiasto Lukita have signed an agreement that might never be ratified in that form.</span> <span class="attribution"><span class="source">DFAT</span></span></figcaption></figure><p>Australia’s trade minister Simon Birmingham and his Indonesian counterpart Enggartiasto Lukita signed the Indonesia-Australia Comprehensive Economic Partnership Agreement on Monday. Only afterwards (as is often the case) did we get to see what was in it.</p>
<p>We might never see an independent assessment of its costs and benefits.</p>
<p>Beforehand the Department of Foreign Affairs and Trade released a summary of the good news about increased Australian agricultural and education exports, together with statements of support from export industry representatives.</p>
<p>It said more than 99% of Australian goods exports by value would enter Indonesia duty free or under significantly improved preferential arrangements by 2020. Indonesia will guarantee automatic issue of import permits for key products including live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes. Australia will immediately <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Pages/ia-cepa-key-outcomes-for-australia.aspx">eliminate remaining tariffs</a> on Indonesian imports into Australia.</p>
<p>But most deals have winners and losers. The devil is in the detailed <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/iacepa-text/Pages/default.aspx">text</a>, released only after the ceremony. </p>
<h2>Employment rights? The environment?</h2>
<p>First, what’s missing. There are no chapters committing both governments to implement basic labour rights and environmental standards as defined in the United Nations agreements, and to prevent them from seeking trade advantages by reducing these rights and standards.</p>
<p>Such chapters are increasingly included in trade deals like the Comprehensive Progressive Trans-Pacific Partnership (<a href="http://aftinet.org.au/cms/node/1599">TPP-11</a>) encompassing nations including Brunei, Malaysia, Mexico, Peru and Vietnam, and the Australia-EU Free Trade Agreement at present under negotiation. </p>
<p>They acknowledge that trade agreements increase competitive pressures, and are intended to prevent a race to the bottom on labour rights and environmental standards.</p>
<p>The fact they are missing from the Indonesia-Australia agreement shows neither government sees them as a priority.</p>
<h2>Extra-national tribunals</h2>
<p>The deal does include something else contentious that was included in the Trans-Trans-Pacific Partnership; so-called <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/iacepa-text/Pages/default.aspx">investor-state dispute settlement clauses</a>, in Chapter 14, Section B.</p>
<p>They give <a href="http://aftinet.org.au/cms/ISDS">special rights to foreign corporations</a> to bypass local courts and sue governments for millions of dollars in extra-national tribunals if they believe a change in law or policy will harm their investment.</p>
<p>The tobacco giant Philip Morris <a href="http://isdsblog.com/2016/05/26/philip-morris-asia-limited-v-australia/">tried it in 2011</a> using investor-state dispute settlement provisions in an obscure Australia Hong Kong agreement after it lost a fight against Australia’s plain packaging laws in the High Court. It eventually lost in the international tribunal, although after four years and at the cost to Australia of <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">nearly 40 million dollars</a>.</p>
<h2>Temporary migrant workers</h2>
<p>Article 12.9 of the Indonesia-Australia agreement will give Indonesia an additional 4,000 temporary working holiday visas, and a commitment over the next three years to negotiate arrangements for more “contractual service providers”.</p>
<p>Unlike permanent migrants, who have the same rights as other workers, temporary workers and contractual service providers are tied to one employer and can be deported if they lose their jobs, and so are vulnerable to exploitation, as shown by recent <a href="http://apo.org.au/system/files/120406/apo-nid120406-483146.pdf">research</a>.</p>
<p>After signing, the implementing legislation has to be passed by both the Australian and Indonesian parliaments before it can come into force.</p>
<h2>And not for some time</h2>
<p>In Australia, the next steps are for the treaty to be reviewed by the Joint Standing Committee on Treaties. But the likely calling of the federal election in April will dissolve this committee. The committee will be reconstituted after the election with the winning party having a majority.</p>
<p>Last year Labor faced a strong backlash from its membership and unions when it supported the implementing legislation for the TPP-11 despite the fact that it was contrary to the then Labor policy. </p>
<p>This led to the adoption of an even stronger policy at its <a href="https://www.alp.org.au/media/1539/2018_alp_national_platform_constitution.pdf">national conference</a> and a <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6201_ems_f52a2980-5bf9-48d2-a9a1-f654acb16383/upload_pdf/18215EMClare.pdf;fileType=application%2Fpdf">draft bill</a> that would apply to both future and existing trade agreements.</p>
<p>It requires independent assessments of the economic, social and environmental impacts of future trade agreements before they are ratified, outlaws investor-state dispute settlement clauses and the removal of labour market testing for temporary workers, mandates labour rights and environmental clauses and requires the renegotiation of non-compliant agreements should Labor win office.</p>
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Read more:
<a href="https://theconversation.com/the-senate-is-set-to-approve-it-but-what-exactly-is-the-trans-pacific-partnership-104918">The Senate is set to approve it, but what exactly is the Trans Pacific Partnership?</a>
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<p>If the Coalition wins office but not a Senate majority, and Labor implements its policy, a Coalition government could face opposition to ratification of the Indonesia-Australia agreement in the Senate.</p>
<p>If Labor wins government, it will face pressure from its base to implement its policy to conduct an independent assessment and renegotiate the provisions before ratification.</p>
<p>In Indonesia, which has elections in April, the deal could also face a rocky road.</p>
<p>Criticisms of the process led civil society groups to lodge a case which resulted in a <a href="http://igj.or.id/statement-of-the-advocacy-team-for-economic-justice-in-the-post-court-verdict-concerning-the-international-treaty-law/?lang=en">ruling by the Indonesian Constitutional Court</a> in November that the Indonesian President cannot approve trade agreements without parliamentary approval. </p>
<p>The opposition parties have been sceptical about the deal. Azam Azman Natawijana, deputy chairman of the parliamentary committee overseeing trade, was quoted in <a href="https://www.theaustralian.com.au/national-affairs/union-threat-to-scupper-agreement-withjakarta/news-story/29f624086de08da84cb35fd5a8492d46">The Australian</a> saying he expected the ratification process to be protracted.</p>
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Read more:
<a href="https://theconversation.com/investor-rights-to-sue-governments-pose-real-dangers-40004">Investor rights to sue governments pose real dangers</a>
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<img src="https://counter.theconversation.com/content/112853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is Coordinator of the Australian Fair Trade and Investment Network, a network of community organizations, including church groups, human rights groups, public health, union and environmental organizations. AFTINET advocates for fair trade policies based on human rights, labour rights and environmental sustainability.</span></em></p>No commitments on environmental standards, but foreign corporations will shore up their rights to sue the Australian and Indonesian governments.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1036742018-09-25T01:35:26Z2018-09-25T01:35:26ZEverything he does, he does it for us. Why Bryan Adams is on to something important about copyright<p>Last Tuesday Bryan Adams entered the copyright debate. </p>
<p>That’s Bryan Adams the singer and songwriter, the composer of “(Everything I Do) I Do It for You”, and “Summer of ’69”.</p>
<p>Authors, artists and composers often have little bargaining power, and are often pressured to sign away their rights to their publisher for life. </p>
<p>Adams appeared before a Canadian House of Commons committee to argue they should be entitled to <a href="https://www.billboard.com/articles/news/8475893/bryan-adams-calls-for-changes-copyright-laws-in-canada">reclaim ownership of their creations 25 years after they sign them away</a>.</p>
<h2>No control until after you are dead</h2>
<p>In Canada they get them back 25 years after they are dead, when the rights automatically revert to their estate. In Australia our law used to do the same, but we removed the provision in 1968. In our law, authors are never given back what they give away.</p>
<p>Some publishers voluntarily put such clauses in their contracts, but that is something they choose to do, rather than something the law mandates.</p>
<p>Australia’s copyright term is long. For written works it lasts for 70 years after the death of the author. It was extended from 50 years after death as part of the Australia-United States Free Trade Agreement. </p>
<h2>What copyright is for</h2>
<p>Copyright is a government-granted limited monopoly to control certain uses of an author’s work. </p>
<p>It is meant to achieve three main things: incentivise the creation of works, reward authors, and benefit society through access to knowledge and culture. </p>
<p>Incentive and reward are not the same thing.</p>
<h2>The incentive needn’t be big</h2>
<p>The copyright term needed to provide an incentive to create something is pretty short.</p>
<p>The <a href="https://www.pc.gov.au/inquiries/completed/intellectual-property/report">Productivity Commission has estimated the average commercial life of a piece of music, for example is two to five years</a>. Most pieces of visual art yield commercial income for just two years, with distribution highly skewed toward the small number with a longer life. The average commercial life of a film is three to six years. For books, it is typically 1.4 to five years; 90% of books are out of print after two years. </p>
<p>It is well accepted by economists that a term <a href="http://press-files.anu.edu.au/downloads/press/n2190/pdf/ch06.pdf">of about 25 years</a> is the maximum needed to incentivise the creation of works.</p>
<h2>But the rewards, for creators, should be</h2>
<p>The second purpose is to provide a <em>reward</em> to authors, beyond the bare minimum incentive needed to create something. Quite reasonably, <a href="https://www.pc.gov.au/__data/assets/pdf_file/0020/201548/subdr524-intellectual-property.pdf">we want to give them a bit extra as thanks for their work</a>. </p>
<p>But, in practice authors, artists and composers are often obliged to transfer all or most of their rights to corporate investors such as record labels or book publishers in order to receive anything at all.</p>
<p>In the film and television industries it is not unusual for creators to have to sign over their whole copyright, forever – and not just here on Earth but <a href="https://www.wsj.com/articles/SB125658217507308619">throughout the universe at large</a>. </p>
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<p>It means investors don’t just take what is needed to incentivise their work but most of the rewards meant for the author as well.</p>
<p>This isn’t new. <a href="https://authorsinterest.org/2017/10/26/whats-old-is-new-again-authors-problems-in-1737-and-today/">Creators have been complaining since at least 1737</a> that too often they have no choice but to transfer their rights before anyone knows what they are worth. </p>
<h2>Other countries do it better</h2>
<p>In recognition of these realities, <a href="https://authorsinterest.org/2018/02/16/author-protective-copyright-hows-it-done-by-other-countries/">many countries, including the US, have enacted author-protective laws</a> that, for example, let creators reclaim their rights back after a certain amount of time, or after publishers stop exploiting them, or after royalties stop flowing. Other laws guarantee creators “fair” or “reasonable” payment. </p>
<p>Australia stands out for having no author protections at all. </p>
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<em>
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Read more:
<a href="https://theconversation.com/australian-copyright-laws-have-questionable-benefits-77178">Australian copyright laws have questionable benefits</a>
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<p>Canada’s law already protects authors by giving rights back to their heirs 25 years after they die. Bryan Adams’s proposal is to change one word in that law. Instead of copyright reverting to the creator 25 years after “death”, he wants it to revert 25 years after “transfer”.</p>
<h2>Copyright is meant to be about ensuring access</h2>
<p>Handing rights back to creators after 25 years would not only help them secure more of copyright’s rewards, it would also help achieve copyright’s other major aim: to promote widespread access to knowledge and culture. </p>
<p>Right now our law isn’t doing a very good job of that, particularly for older material. </p>
<p>Copyright lasts for so long, and distributors lose financial interest in works so fast, that they are often neither properly distributed nor available for anyone else to distribute. </p>
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Read more:
<a href="https://theconversation.com/life-plus-70-who-really-benefits-from-copyrights-long-life-48971">Life plus 70: who really benefits from copyright's long life?</a>
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<p>In the book industry <a href="http://elendingproject.org/large_full.html">my research into almost 100,000 titles</a> has found that publishers license older e-books to libraries on the same terms and for the same prices as newer ones. That includes “exploding” licences which force books to be deleted from collections even if nobody ever borrows them.</p>
<p>Publishers are interested in maximising their share of library collections budgets, not ensuring that a particular author continues to get paid or a particular title continues to get read. </p>
<p>As a result libraries <a href="https://youtu.be/fRMiyPQypNY?t=7m59s">often forgo buying older (but still culturally valuable) books</a> even though they would have bought them if the publisher cared enough to make them available at a reasonable price. </p>
<p>Restricting access to books is not in the interests of authors or readers.</p>
<h2>… and directing rewards where they are needed</h2>
<p>If rights reverted after 25 years, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3252838">as I have proposed</a> and as Adams now proposes, authors would be able to do things like license their books directly to libraries in exchange for fair remuneration – say $1 per loan. </p>
<p>If authors weren’t interested in reclaiming their rights, they could automatically default to a “cultural steward” that would use the proceeds <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3252838">to directly support new creators via prizes, fellowships and grants</a> – much like Victor Hugo envisaged with his idea of a “paid public domain” back in 1878.</p>
<p>We could do it all without changing the total copyright term imposed on us by the Australia-US Free Trade Agreement and other treaties. We could <a href="https://overland.org.au/previous-issues/issue-232/feature-fat-horses-starving-sparrows/">get creators paid more fairly</a> while keeping Australian culture alive. </p>
<p>Reversion is the key.</p><img src="https://counter.theconversation.com/content/103674/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rebecca Giblin is an Australian Research Council Future Fellow. She currently leads the Author's Interest fellowship project (authorsinterest.org; FT170100011) and a multidisciplinary linkage project investigating e-lending in public libraries (elendingproject.org; LP160100387). For six years until May 2018 Rebecca volunteered her time and expertise as an independent expert on the Board of the Australian Digital Alliance.</span></em></p>Individual creators get too small a share of copyright’s rewards. What Bryan Adams is proposing in Canada could also work in Australia to help authors get paid and keep works available to the public.Rebecca Giblin, ARC Future Fellow; Associate Professor, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1025622018-09-04T10:35:43Z2018-09-04T10:35:43ZWhy Trump’s wrong about WTO treating US unfairly<figure><img src="https://images.theconversation.com/files/234715/original/file-20180904-41717-1mqxtyt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump believes the Geneva-based WTO treats the U.S. with disrespect. </span> <span class="attribution"><span class="source">Martin Good/Shutterstock.com</span></span></figcaption></figure><p>President Donald Trump <a href="https://www.cnbc.com/2018/08/30/trump-threatens-to-withdraw-from-world-trade-organization.html">recently threatened</a> to pull the United States out of the World Trade Organization “if they don’t shape up.” </p>
<p>His <a href="https://economictimes.indiatimes.com/news/international/business/donald-trump-threatens-to-pull-us-out-of-wto-if-it-doesnt-shape-up/articleshow/65616403.cms">argument</a> is that the organization treats its <a href="https://www.wto.org/english/thewto_e/secre_e/contrib_e.htm">single-largest investor</a> unfairly, <a href="https://www.bbc.com/news/world-us-canada-45364150">claiming that</a> the U.S. loses “almost all of the lawsuits in the WTO.”</p>
<p>Is Trump correct that the WTO singles out the U.S.? </p>
<p>While international political economists such as <a href="https://sites.google.com/site/jeffreykucik/">myself</a> recognize that the WTO’s dispute system is imperfect, there is little evidence to justify threats of withdrawal. </p>
<h2>The case against the WTO</h2>
<p>Critics of America’s trade deals – including its commitments in Geneva, where the WTO is based – <a href="https://www.nytimes.com/2018/03/23/business/trump-world-trade-organization.html">argue</a> that trade law disadvantages the United States. </p>
<p>As evidence, <a href="https://www.reuters.com/article/us-usa-trade-wto-analysis/trumps-bonfire-of-the-treaties-sweeps-towards-the-wto-idUSKCN1IJ1K9">they point to</a> the fact that the U.S. currently faces near-historic levels of trade litigation.</p>
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<p>America’s partners have <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm">filed 17 complaints</a> so far in 2018. More than half of those disputes relate to Trump’s <a href="https://theconversation.com/us/topics/steel-tariffs-50747">steel and aluminum tariffs</a>.</p>
<p>To put that number in perspective, 17 disputes is <a href="https://www.trademonitoronline.com/litigation-spike">double the average number of annual filings</a> over the past 15 years. The last time there were so many cases against the U.S. was back in 2002. Not coincidentally, that was when <a href="https://theconversation.com/george-w-bush-tried-steel-tariffs-it-didnt-work-92904">President George W. Bush’s steel policies</a> were <a href="https://www.nytimes.com/2003/03/27/business/wto-rules-against-us-on-steel-tariff.html">widely attacked</a>.</p>
<p>In addition to being sued so often, Trump worries that the U.S. <a href="https://www.bloomberg.com/news/articles/2018-08-30/trump-says-he-will-pull-u-s-out-of-wto-if-they-don-t-shape-up">loses a disproportionate number</a> of cases. </p>
<p>Hence, the now frequently heard <a href="https://www.ft.com/content/afce06d0-39aa-11e8-8eee-e06bde01c544">claim</a> that the United States is being unfairly punished under international trade law.</p>
<h2>A narrow reading of the facts</h2>
<p>The White House is right about two things.</p>
<p>First, it is true that the United States is sued more often than any other WTO member. Since it was set up in 1995, <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">members have filed</a> 150 complaints targeting U.S. policies, that’s 78 percent more than there have been against the European Union and more than triple those against China. In fact, those 150 cases account for over 25 percent of all WTO disputes.</p>
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<p>Second, it is also true that the United States lost the vast majority of those cases. Only <a href="https://www.cambridge.org/core/journals/british-journal-of-political-science/article/measuring-the-cost-of-privacy-a-look-at-the-distributional-effects-of-private-bargaining/4572C5E003235E54D5C1C6001D5C952A">about half</a> of all WTO disputes end with a formal ruling. The other half are settled or linger for years in the initial consultation stage of the dispute process. Among those with a verdict, the U.S. lost entirely or in part 87 percent of the cases against it.</p>
<p>At first glance, that looks like strong support for Trump’s argument. But do these two facts really mean the deck is stacked against the U.S.? </p>
<p>Not once we put the numbers into context.</p>
<h2>Where Trump gets it wrong</h2>
<p>To begin with, it’s worth considering why the U.S. gets sued in the first place.</p>
<p>Part of the explanation is simple: the U.S. hasn’t been shy about protecting its domestic industries, deploying a wide variety of policies to insulate them from foreign competition.</p>
<p>Some of these are <a href="https://www.heritage.org/trade/report/guide-antidumping-laws-americas-unfair-trade-practice">highly controversial</a>. For example, the U.S. is a <a href="https://www.trademonitoronline.com/us-at-the-wto">world leader</a> in the use of <a href="https://www.wto.org/english/tratop_e/adp_e/adp_e.htm">anti-dumping</a>, a form of duty applied to foreign goods sold below normal market prices. </p>
<p>In order to use anti-dumping legally, countries have to <a href="https://www.wto.org/english/docs_e/legal_e/ursum_e.htm#fAgreement">demonstrate material harm</a> to their domestic industries. Naturally, proving that dumping has occurred is open to some debate. </p>
<p>Hence, there have been 126 individual disputes over this policy, <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_agreements_index_e.htm">accounting for almost 25 percent</a> of the WTO’s entire case load. This includes the U.S., which has been sued more than 50 times for its use of anti-dumping duties alone.</p>
<p>Thus, relying on controversial policies at home exposes the U.S. to trade litigation abroad.</p>
<p>Perhaps more importantly, Trump misrepresents America’s losing record.</p>
<p>Yes, the U.S. loses nearly 90 percent of panel rulings. But the fact is that every respondent almost always loses to the tune of at least <a href="https://academic.oup.com/isq/article/60/2/294/1753910">a comparable 90 percent</a>.</p>
<p>That’s one of the plain realities of WTO dispute settlement. If a country gets sued, and that case ends up before a panel, the respondent will likely lose. That’s true of the U.S., the EU, China or anyone else. That’s partly because litigation isn’t free. Complainants are more likely to file, and proceed to a ruling, when there’s high confidence of winning. Otherwise it isn’t worth it. </p>
<p>In sum, the numbers simply don’t support the argument that the U.S. is targeted without cause or that it is treated unfairly. Insistence in Washington on using contentious trade policies increases the rate of filings against the U.S. And, while the America loses a lot, it doesn’t lose any more often than the membership at large.</p>
<h2>The escalating crisis in Geneva</h2>
<p>None of this is to say that the system is perfect. </p>
<p>Legitimate grounds for disagreement have created calls for reform. Downstream compliance remains a problem across its 160-plus members. And <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2009/january/us-proposes-wto-appellate-body-reforms">efforts by the U.S.</a> or others to reform the system – such as to the appeals process to <a href="https://www.ictsd.org/bridges-news/bridges/news/2018-ustr-trade-agenda-highlights-wto-reform-fta-talks">reduce lengthy delays</a> and judicial overreach – have gone nowhere. </p>
<p>As a result, the U.S. has blocked all appointments of appellate judges since Trump took office, reducing the total number from seven to three, which could potentially paralyze the body’s ability to work.</p>
<p>This is <a href="https://www.ictsd.org/bridges-news/bridges/news/wto-members-intensify-debate-over-resolving-appellate-body-impasse">bad news</a> for the system. The majority of panel rulings are appealed, and the process <a href="https://www.voanews.com/a/world-trade-organization-us-vetoes-judges/4139558.html">cannot function</a> without a consensus over judge appointments.</p>
<h2>Losing America’s seat at the table</h2>
<p>In spite of the system’s flaws, the WTO has benefits beyond trade promotion. Having a rules-based system is also important for limiting the kind of trade discrimination the White House <a href="https://www.nbcnews.com/politics/white-house/trump-asia-say-goodbye-days-chronic-trade-abuses-u-s-n819596">frequently</a> alleges.</p>
<p>Yet, Trump continues to talk like the WTO is a one-way street. He seems to forget that the U.S. isn’t just the most frequent respondent. It’s also the most <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm">frequent complainant</a>.</p>
<p><iframe id="Dr5iU" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/Dr5iU/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>A political compromise over the appeals process is needed to ensure the WTO functions efficiently. But withdrawing from the agreement, and giving up America’s seat at the table, isn’t going to do much to protect U.S. interests – as we <a href="https://www.csis.org/analysis/rule-maker-rule-taker?utm_source=Members&utm_campaign=6f2f745038-EMAIL_CAMPAIGN_2018_08_29_01_45&utm_medium=email&utm_term=0_e842221dc2-6f2f745038-137665349">have seen</a> in other areas of international law.</p><img src="https://counter.theconversation.com/content/102562/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey Kucik 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 president again threatened to drop out of the World Trade Organization if it doesn’t ‘shape up.’ But a careful review of case filings show the US isn’t treated any differently than its other members.Jeffrey Kucik, Assistant Professor of Political Science, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1023502018-09-01T10:14:35Z2018-09-01T10:14:35ZAustralian universities to benefit in Australia-Indonesia free trade deal<p>On August 31, Prime Minister Scott Morrison secured an end to negotiations on <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Documents/iae-cepa-key-outcomes.pdf">a new free trade agreement</a> with Indonesian President Joko Widodo, opening a path for Australian universities to build new campuses in Indonesia. Negotiations began in 2012, but have recently ramped up. President Widodo and Prime Minister Morrison signed a memorandum of understanding committing the countries to get a free trade deal done by November.</p>
<p>Cooperation with Indonesia in the higher education space is both promising and complex. The prospect of Australian campuses in Indonesia represents another set of opportunities for education providers, in facilitating “internationalisation at home”.</p>
<hr>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/what-indonesia-expects-from-australias-new-prime-minister-scott-morrison-102333">What Indonesia expects from Australia's new Prime Minister Scott Morrison</a>
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<p>The higher education component of this free trade deal is important to Australian universities and to the broader economy. But its negotiation presents significant challenges. It’s important to carefully consider how Australia approaches establishing campuses in Indonesia, keeping in mind the student experience is most important.</p>
<h2>Education cooperation with Indonesia</h2>
<p>Australia faces competition from other countries trying to attract Indonesian students, including the US, Malaysia, and increasingly <a href="https://www.scmp.com/week-asia/society/article/2139714/whats-made-indonesian-students-forget-china-taboo">China</a>.</p>
<p>Education is crucial to the Australian economy. The category of education-related travel services is Australia’s largest services export and its <a href="https://www.austrade.gov.au/News/Economic-analysis/australias-export-performance-in-fy2017">third largest export overall</a>. Australia is the <a href="http://uis.unesco.org/en/uis-student-flow">most popular destination</a> for Indonesians studying overseas. </p>
<p>But given Indonesia’s large population (about 260 million) and close proximity to Australia, the number of Indonesian students studying in Australia at a tertiary level is surprisingly low. It sat at <a href="https://indonesia.embassy.gov.au/jakt/MR17_059.html">around 20,000</a> in the year to June 2017.</p>
<p>Far more students come from China (<a href="https://www.smh.com.au/politics/federal/chinese-student-numbers-fairly-modest-with-room-to-grow-says-minister-20180302-p4z2gr.html">about 166,000</a>) and India (<a href="https://www.sbs.com.au/yourlanguage/hindi/en/article/2018/02/16/number-indian-students-studying-australia-seven-year-high">about 70,000</a>). While these countries have bigger populations, we still might ask why a proportionately lower number of Indonesian students come to Australia for university and vocational courses.</p>
<p>Part of the answer is only about 46,000 Indonesians study at a tertiary level overseas. The proportion of the Indonesian population who complete tertiary education in Indonesia or another country is not high. The <a href="https://www.lowyinstitute.org/publications/beyond-access-making-indonesia-s-education-system-work#sec34441">gross</a> tertiary enrolment rate is <a href="https://www.lowyinstitute.org/publications/beyond-access-making-indonesia-s-education-system-work#sec34441">about 25%</a> – but the completion rate is lower. The Indonesian government is prioritising the improvement of the quality of its education system at all levels.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/indonesias-knowledge-sector-is-catching-up-but-a-large-gap-persists-67937">Indonesia’s knowledge sector is catching up, but a large gap persists</a>
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<p>This is, in part, why the education component of the trade deal is complicated. Australian universities have already <a href="https://www.smh.com.au/world/push-for-australian-university-campuses-in-indonesia-under-free-trade-deal-20170222-guiwhp.html">expressed interest</a> in establishing campuses in Indonesia. But these cannot be wholly owned by Australian institutions. The Indonesian government has indicated Australian universities must form partnerships with local private institutions. </p>
<p>Under the free trade agreement, Australian universities would be <a href="https://www.theage.com.au/politics/federal/free-trade-agreement-between-australia-indonesia-only-one-page-long-20180830-p500le.html">allowed to own 67%</a> of the campuses. Foreign investors are currently barred from majority ownership in an Indonesian university.</p>
<h2>Opportunities, risks and the ‘market’</h2>
<p>While it’s tempting for international education providers to see Indonesia as a growth market while <a href="https://www.worldbank.org/en/news/press-release/2017/12/04/indonesia-middle-class-vital-for-the-country-future">the economy and middle class expand</a>, we shouldn’t assume the number of Indonesian students studying at Australian universities will increase. </p>
<p>The <a href="https://go8.edu.au/">Group of Eight</a> (Go8) has argued <a href="https://go8.edu.au/publication/group-eight-submission-department-foreign-affairs-and-trade-regarding-proposed-indonesia">in a submission</a> to the <a href="https://dfat.gov.au/pages/default.aspx">Department of Foreign Affairs and Trade</a> (DFAT) that the establishment of Australian campuses in Indonesia would provide study opportunities to students who couldn’t afford to study in Australia.</p>
<p>But there’s much to be negotiated and designed in regard to offshore campus structuring and managing risk. The experiences of establishing campuses in other countries have varied, and <a href="https://theconversation.com/branching-out-why-universities-open-international-campuses-despite-little-reward-46129">some have failed</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/234372/original/file-20180831-195316-1ag4a42.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">It’s important to see Indonesian students not just as an economic opportunity, but as young people making big decisions about their future.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Indonesian students aren’t just cash cows</h2>
<p>We should also caution against a tendency to consider international students primarily in terms of sources of revenue. Their individual learning experiences and well-being while in Australia, or on overseas campuses of Australian universities, must be at the forefront of decision-making in this space. </p>
<p>Our understanding of the Indonesian education system and the needs of Indonesian prospective students could be improved. A <a href="https://www.lowyinstitute.org/publications/beyond-access-making-indonesia-s-education-system-work#sec34441">recent report</a> is a rare example of the research we should undertake and understand. </p>
<p>The report examined the reasons Indonesia has so far failed to develop a high-quality education system capable of producing strong learning outcomes. It concluded this was mostly due to issues of power and politics, not funding or poor management.</p>
<p>If it’s done well, the internationalisation of higher education is an important part of broader diplomatic relations. We should see the overseas campuses proposal as a potentially valuable part of our efforts to improve an often fraught bilateral relationship. </p>
<p>The strategically minded may also see it as an effort to balance Chinese influence and competition in Southeast Asia. But Australian universities should remember this is one dimension of a large and complex set of collaborations with Indonesian students. They are, most importantly, young people making big decisions about their future.</p><img src="https://counter.theconversation.com/content/102350/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Avery Poole currently has a grant from The Australia-Indonesia Centre. </span></em></p>Under the free trade agreement, Australian universities will be able to have majority ownership of an Indonesian university.Avery Poole, Assistant Director, Melbourne School of Government, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992742018-07-03T10:35:45Z2018-07-03T10:35:45ZWhat is the WTO?<p>President Donald Trump has made the World Trade Organization <a href="https://piie.com/blogs/trade-investment-policy-watch/us-exit-wto-would-unravel-global-trade">a frequent target</a>.</p>
<p>Recently, he’s <a href="https://www.axios.com/trump-trade-war-leaked-bill-world-trade-organization-united-states-d51278d2-0516-4def-a4d3-ed676f4e0f83.html">reportedly considering</a> suspending U.S. compliance with the global body – a claim the White House <a href="https://www.reuters.com/article/us-usa-trade-wto/treasury-chief-mnuchin-slams-report-that-trump-wants-to-exit-wto-idUSKBN1JP1EC">quickly denied</a>.</p>
<p>What exactly is the WTO, and would it matter if the U.S. left it? As an international trade <a href="https://scholar.google.com/citations?user=yNkGbyQAAAAJ&hl=en&oi=ao">scholar</a>, I’d like to start with the history.</p>
<h2>History of the WTO</h2>
<p>Creation of the <a href="https://www.wto.org">Geneva-based WTO</a> in 1995 was the culmination of a <a href="https://theconversation.com/rules-based-trade-made-the-world-rich-trumps-policies-may-make-it-poorer-97896">50-year effort</a> spearheaded by successive U.S. governments to establish and secure a rules-based multilateral trade regime.</p>
<p>Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This <a href="http://www.press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html">also contributed</a> to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.</p>
<p>The 1948 <a href="https://www.investopedia.com/terms/g/gatt.asp">General Agreement on Tariffs and Trade</a>, the WTO’s predecessor, was designed to avoid a repeat of the collapse of trade in the 1930s that <a href="https://www.ucpress.edu/book/9780520275850/the-world-in-depression-1929-1939">worsened the Great Depression</a> and to eliminate market access as a reason to go to war. </p>
<h2>A success story</h2>
<p>The result has been spectacularly successful. <a href="https://www.statista.com/statistics/264682/worldwide-export-volume-in-the-trade-since-1950/">Country exports</a> as a share of global output surged from less than 5 percent in 1948 to over 30 percent today.</p>
<p>This enabled countries to <a href="https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi03_e.htm">grow faster and steadier</a> and brought peace and prosperity to Europe and Japan. </p>
<p>Members of the WTO, which currently number 164, agree to four core principles: </p>
<ul>
<li><p>non-discrimination, which means all imports are subject to the same tariff rate, with some exceptions</p></li>
<li><p>reciprocity, which balances the reduction of barriers and allows for retaliation </p></li>
<li><p>transparency</p></li>
<li><p>decision-making by consensus.</p></li>
</ul>
<h2>How it works</h2>
<p>The WTO facilitates trade negotiations among member countries to open up markets and <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">settle disputes</a> that arise. </p>
<p><a href="https://www.wto.org/english/tratop_e/dda_e/dda_e.htm">Subsequent rounds of negotiations</a> have allowed countries to take big steps toward trade liberalization, while balancing concessions with benefits. </p>
<p>When disputes arise, such as the <a href="https://theconversation.com/george-w-bush-tried-steel-tariffs-it-didnt-work-92904">Trump steel tariffs</a>, impartial panels adjudicate using WTO rules and permit injured countries to sanction violators. The U.S. <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">ranks among the most frequent</a> and successful users of this, which has helped keep markets open for American exporters.</p>
<h2>What would happen if the US left</h2>
<p>If the U.S. were to leave the WTO, other countries could freely raise tariffs against it. And the U.S. would lose access to the dispute settlement mechanism, which would make retaliation the only response available. </p>
<p>This would inevitably raise prices and reduce choice for U.S. consumers, undercut the competitiveness and profitability of companies that rely on imports and slow economic growth. The WTO’s demise would also raise the odds of violent conflict among states.</p><img src="https://counter.theconversation.com/content/99274/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen J. Silvia 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 has often talked about leaving the World Trade Organization. An economist explains what it is and what would happen if the president had his way.Stephen J. Silvia, Professor of International Relations, American University School of International ServiceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/978962018-06-10T13:28:50Z2018-06-10T13:28:50ZRules-based trade made the world rich. Trump’s policies may make it poorer<figure><img src="https://images.theconversation.com/files/222462/original/file-20180610-191943-14f0w0e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump against the world?</span> <span class="attribution"><span class="source">Jesco Denzel/German Federal Government via AP</span></span></figcaption></figure><p>Nations sell goods and services to each other because this exchange is generally mutually beneficial.</p>
<p>It’s easy to understand that Iceland should not be growing its own oranges, given its climate. Instead, Iceland should buy oranges from <a href="http://www.idealspain.com/pages/information/oranges-spain.html">Spain</a>, which can grow them more cheaply, and sell Spaniards fish, which <a href="https://www.icelandaircargo.com/products-and-services/fresh-fish-and-seafood/">are abundant</a> in its waters. </p>
<p>That’s why the explosion in <a href="https://theconversation.com/us/topics/free-trade-1698">free trade</a> since the first bilateral deal was penned between Britain and France in the mid-1800s has <a href="https://www.cesifo-group.de/DocDL/forum-4-14-intro3.pdf">generated unprecedented</a> wealth and prosperity for the vast majority of the world’s population. Hundreds of trade agreements later, the U.S. and several other countries established an international rules-based trading system after World War II.</p>
<p>But now the U.S., which has played an integral role in bolstering this system, is actively trying to subvert it. At the <a href="https://theconversation.com/us/topics/g7-17736">recent G-7 summit</a> in Quebec, for example, the Trump administration <a href="https://www.nytimes.com/2018/06/08/world/americas/trump-g7-trade-russia.html">objected</a> to even referring to a “rules-based international order” in the <a href="https://www.reuters.com/article/us-g7-summit-communique-text/the-charlevoix-g7-summit-communique-idUSKCN1J5107">official communique</a> – and the president ultimately <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=span-ab-top-region&region=top-news&WT.nav=top-news">refused to sign it</a>. </p>
<p><a href="https://scholar.google.com/citations?user=x5dB33oAAAAJ&hl=en&oi=ao">My research</a> in <a href="https://www.crcpress.com/The-Economics-of-International-Trade-and-the-Environment/Batabyal-Beladi/p/book/9781566705301">international economics</a> tells me that trade policy – because it is inherently forward-looking and global – requires three interrelated attributes to be successful: It needs to reduce uncertainty, ease long-term decision-making, and be legal and credible. </p>
<p>President Donald Trump’s <a href="https://theconversation.com/g7-summit-trump-could-be-using-advanced-game-theory-negotiating-techniques-or-hes-hopelessly-adrift-97836">recent trade policy</a> fails all three tests. </p>
<h2>Birth of modern free trade</h2>
<p>Britain and France signed the first post-Industrial Revolution trade agreement, dubbed the Cobden-Chevalier treaty, on Jan. 23, 1860. </p>
<p>In it, both countries <a href="http://www.nber.org/papers/w22070.pdf">agreed</a> to either reduce or eliminate import barriers and grant the other most favored nation status, which means any trade concessions offered to another nation would automatically apply to them as well. </p>
<p>Within just 15 years, various countries inked <a href="https://trove.nla.gov.au/work/1482271">56 more bilateral treaties</a>. Thus began the first wave of globalization, which lasted from 1870 until 1914, the beginning of two destructive world wars. </p>
<p>From those ruins emerged a rules-based international trading system, known as the <a href="https://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm">General Agreement on Tariffs and Trade</a>, or GATT, which came into force in 1948. <a href="https://www.thebalance.com/gatt-purpose-history-pros-cons-3305578">Its goal</a> was to eliminate the kind of harmful trade protectionism that had <a href="https://www.dartmouth.edu/%7Edirwin/Eichengreen-IrwinJEH.pdf">sharply reduced</a> global trade during the Great Depression with the aim of quickly restoring the global economy’s health after so much devastation.</p>
<p>Almost a half century of negotiations to improve the agreement culminated in the creation of the World Trade Organization in 1995. The lynchpin of the modern rules-based international trading system, the WTO now <a href="https://www.wto.org/english/thewto_e/thewto_e.htm">includes 164 nations</a> that together <a href="http://www.nber.org/papers/w22070.pdf">conduct more than 96 percent</a> of the world’s trade.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=483&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=483&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=483&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Until very recently, the U.S. was a leader in free trade, such as in 1996, when G-7 leaders including former President Bill Clinton met a little more than year after establishing the World Trade Organization.</span>
<span class="attribution"><span class="source">AP Photo/Jerome Delay</span></span>
</figcaption>
</figure>
<h2>Three key attributes</h2>
<p>This system has worked so well for so long because the WTO and its biggest champions, such as the U.S., made three interrelated attributes integral to their trade policies. That is, its members: </p>
<ol>
<li><p>reduced uncertainty by creating predictable trade policies </p></li>
<li><p>created an environment that facilitates decision-making – particularly in the long term – by consumers and producers and </p></li>
<li><p>placed credible and legal directives that are clearly understood by allies and by those who are not. </p></li>
</ol>
<p>Even though the U.S. played a salient role in the creation of both the GATT and the WTO, Trump’s trade policy has not followed these guidelines. To me he seems more interested in wreaking havoc with the current global trading system than with ensuring its continued viability. And he’s frequently – and <a href="https://www.chathamhouse.org/expert/comment/trump-s-tariffs-presage-world-no-rules">very recently</a> – intimated that he might even withdraw the U.S. from the WTO.</p>
<p>Trump seems to think that by issuing tariff threats, being unpredictable, and viewing foreign countries – even allies – as rival businesses he can extract concessions from trading partners. Instead, such tactics <a href="https://www.bloomberg.com/news/articles/2018-05-31/trump-s-art-of-unpredictability-starts-to-backfire-overseas">are proving</a> to be counterproductive.</p>
<h2>Sowing uncertainty</h2>
<p>Perhaps more than anything else, Trump’s policies have created a lot of uncertainty among U.S. trade partners. </p>
<p>His steel and aluminum tariffs are a case in point. In March, the administration announced across-the-board tariffs on imports of the metals of up to 25 percent to punish nations – particularly China – for subsidizing their own industries and dumping their production on U.S. shores. </p>
<p>After key allies including Canada, the European Union and Mexico complained, the administration granted some countries temporary exemptions to the tariffs. But just a few months later, on May 31, it <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">reversed course</a> and began to impose the tariffs on those countries as well, leaving heads spinning. Only a week later, at the <a href="https://theconversation.com/what-each-of-the-g7-countries-wants-and-what-they-need-97828">G-7</a>, Trump <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news">was threatening</a> to cut off all trade with his counterparts one minute, suggesting that everyone eliminate all tariffs the next.</p>
<p>Another <a href="https://www.vox.com/policy-and-politics/2018/5/15/17355202/trump-zte-indonesia-lido-city">recent example</a> of fostering uncertainty is the curious case of the Chinese phone manufacturer ZTE. In March 2017, Trump’s Commerce Department <a href="https://www.pcmag.com/news/352232/zte-will-pay-record-fine-for-sales-to-iran-north-korea">fined ZTE</a> US$1.19 billion for violating U.S. sanctions law by selling technology containing U.S. components to Iran and North Korea. This past April, the agency said ZTE was still violating U.S. law and barred American companies – most importantly chip-maker Qualcomm – from selling anything to ZTE, which led to an <a href="https://arstechnica.com/tech-policy/2018/05/the-trump-administration-just-forced-smartphone-maker-zte-to-shut-down/">announcement</a> that it was shutting down less than a month later. </p>
<p>Within days, however, Trump appeared to have an abrupt change of heart and <a href="https://twitter.com/realDonaldTrump/status/995680316458262533">tweeted</a> that he and Chinese President Xi Jinping were working getting ZTE “back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”</p>
<p>Flip-flops like these make it hard for trade partners to predict what the U.S. government is going to do, breeding enormous uncertainty.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.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">Trump turned heads when he said he wanted to save Chinese tech giant ZTE, shortly after his administration helped bring it to its knees.</span>
<span class="attribution"><span class="source">AP Photo/Ng Han Guan</span></span>
</figcaption>
</figure>
<h2>Decision-making</h2>
<p>Consider the situation faced by an American businessman who produces high-level industrial equipment that is exported to many countries around the world. </p>
<p>His company’s equipment is made using aluminum and steel and, as a result of Trump’s new tariffs, this businessman <a href="https://www.nytimes.com/2018/05/31/upshot/-us-tariffs-real-economic-risk-is-unpredictability.html">will have difficulty predicting</a> what the cost of the metals will be in the future. This will have clear implications for the pricing of his products. In addition, if the U.S. gets into a trade war, this businessman will also not know whether some or all foreign buyers might look elsewhere for similar but cheaper alternatives.</p>
<p>Such thinking affects not just individual business people but <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">also companies</a>. </p>
<p>Far from hypothetical, <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">companies</a> are already warning about this. Ford and Toyota North America <a href="http://www.businessinsider.com/trump-steel-aluminum-tariffs-means-expensive-cars-trucks-2018-3/">have both complained</a> about the negative impacts of Trump’s metals tariffs on costs and on the ability to make sound investment decisions.</p>
<h2>Act credibly and legally</h2>
<p>Trump’s steel and aluminum tariffs have also raised questions about their legality and credibility. </p>
<p>German Chancellor Angela Merkel and French President Emmanuel Macron <a href="https://www.washingtonpost.com/world/eu-plots-counterstrike-to-american-tariffs/2018/06/01/aa07dfa8-6521-11e8-81ca-bb14593acaa6_story.html?utm_term=.9b95cf0cb455">have both asserted</a> that these tariffs are illegal. As such, the European Union <a href="https://www.theguardian.com/business/2018/jun/01/eu-starts-retaliation-against-donald-trumps-steel-and-aluminium-tariffs">has filed a suit</a> against the U.S. at the WTO. It’s unclear whether the American national security justification will sway the WTO judges.</p>
<p>Prime Minister Justin Trudeau, who <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html">was the target</a> of a post-G-7 Trump tweetstorm, <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">has wondered</a> how Canada could possibly be a national security threat to the U.S. Even Defense Secretary James Mattis <a href="https://www.forbes.com/sites/johnbrinkley/2018/03/12/trumps-national-security-tariffs-have-nothing-to-do-with-national-security/#285badc0706c">is reported</a> to have pointed out the implausibility of the national security argument for the tariffs.</p>
<p>This gloomy state of affairs shows that even some of our long-standing friends believe that the Trump administration’s recent actions are illegal and, more generally, that these same allies cannot make head nor tail of the administration’s trade initiatives.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.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">Trump’s policies are irking two of the U.S.’s most important allies, France’s Emmanuel Macron and Canada’s Justin Trudeau.</span>
<span class="attribution"><span class="source">AP Photo/Evan Vucci</span></span>
</figcaption>
</figure>
<h2>A key lesson</h2>
<p>The U.S. is the world’s richest and <a href="https://www.usnews.com/news/best-countries/power-rankings">most powerful nation</a>, in part <a href="https://www.economist.com/briefing/2016/11/12/the-piecemaker">because of its embrace</a> of a rules-based international order that includes the present treaty-based global trading system.</p>
<p>Rather than build on that success, President Trump’s trade actions thus far have <a href="https://www.nytimes.com/2018/03/01/us/politics/trump-chaos-oval-office.html">created chaos</a>, which has not led to any noteworthy success either in terms of extracting concessions from trade partners or creating the “great” agreements he touts in his book “<a href="https://www.thestreet.com/story/13289498/1/10-things-you-learn-reading-donald-trump-s-best-seller-the-art-of-the-deal.html">The Art of the Deal</a>.” </p>
<p>In negotiating deals, trade or otherwise, Trump <a href="https://www.bostonglobe.com/opinion/2018/03/12/trump-breaking-all-rules-and-that-could-great-for-america/xlotc2ETtBEBCLA5Zxpp8O/story.html">seems to like to break</a> all the rules. He needs to learn: That’s not what made America great.</p><img src="https://counter.theconversation.com/content/97896/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal has received research funding from the Giannini Foundation for Agricultural Economics, the United States Department of Agriculture, and the Charles Koch Foundation.</span></em></p>International trade policy requires three traits to be successful and lead to mutual prosperity. Trump’s is missing all three, as he showed at the G-7 summit.Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/978362018-06-08T15:53:03Z2018-06-08T15:53:03ZTrump could be using advanced game theory negotiating techniques – or he’s hopelessly adrift<p>The latest G-7 summit, held June 8 to 9 in Quebec, was one of the <a href="https://www.bbc.com/news/world-us-canada-44409775">most contentious</a> in years. </p>
<p>That’s because Donald Trump and his counterparts from six other industrialized countries have been at loggerheads over the president’s aggressive but unstable trade policy. Trump’s renunciation of the <a href="https://www.cnbc.com/2018/05/24/washington-and-europe-playing-game-of-chicken-over-iran-nuclear-deal.html">Iran nuclear deal</a>, his efforts to <a href="https://www.nytimes.com/2018/06/06/us/politics/trump-nafta-businesses-frustrated.html">renegotiate NAFTA</a> and his intransigent stance on <a href="https://www.nationalobserver.com/2018/06/07/news/trump-leave-g7-early-miss-session-climate-change-and-clean-energy">climate change</a> are not helping matters. Nor is his proposal to <a href="https://www.nytimes.com/2018/06/08/world/americas/trump-g7-trade-russia.html">readmit Russia</a> to the G-7 gathering. </p>
<p>But the ink on the G-7 communique wasn’t dry before Trump <a href="http://time.com/5305550/donald-trump-north-korea-kim-jong-un-singapore-summit-what-to-know/">darted to Singapore</a> to meet with North Korean leader Kim Jong Un for nuclear talks, another example of his unpredictable decision-making style. One moment he’s threatening war with the dictator, and the next he’s buttering him up for a summit. </p>
<p>One way to understand Trump’s foreign policy decisions is to focus on their inconsistency rather than their content. Let’s take trade policy as an example.</p>
<p>I <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">have written</a> a <a href="https://theconversation.com/why-its-too-soon-for-davos-billionaires-to-toast-trumps-pro-business-policies-90803">number of times</a> about the economic dangers of the Trump administration’s tilt toward protectionism. And I <a href="https://theconversation.com/trumps-go-it-alone-approach-to-china-trade-ignores-wtos-better-way-to-win-93918">have pointed to</a> the risk that Trump’s use of trade policy as a unilateral weapon <a href="https://cpianalysis.org/2018/05/09/u-s-china-trade-jockeying-for-influence/">could undermine</a> the rule-based international order.</p>
<p><a href="https://scholar.google.com/citations?user=Y58-EhUAAAAJ&hl=en&oi=ao">I remain worried</a> about these issues, but what has struck me much more deeply in recent days is the seeming inconsistency, indeed instability, of Trump’s behavior on trade. It is worth considering its causes and consequences – which extend far beyond trade to his nuclear game of chess with North Korea and Iran.</p>
<h2>Trouble in Trump trade land</h2>
<p>First let’s review just a few of Trump’s recent trade decisions. </p>
<p>At the G7, Trump’s belligerent and unpredictable trade policy was the main reason the other leaders – which also include Germany’s Angela Merkel, the U.K.’s Theresa May and France’s Emmanuel Macron – are so perturbed. Some commentators are even beginning to term the meeting a “<a href="https://talkingpointsmemo.com/news/a-g6-plus-one-us-singled-out-by-g7-allies-over-steel-tariffs">G6 plus one</a>” to signify Trump’s estrangement from his allies. </p>
<p>Recent events have inflamed tensions significantly. The White House said on May 31 <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">that it would impose</a> steel and aluminum tariffs on the European Union, Canada and Mexico. The three had previously <a href="http://money.cnn.com/2018/03/22/news/economy/steel-aluminum-tariff-exemptions/index.html">received exemptions</a> from the new tariffs, first imposed in March and justified with a little-used <a href="https://theconversation.com/economic-history-shows-why-trumps-america-first-tariff-policy-is-so-dangerous-92715">national security provision</a>.</p>
<p>All are now planning <a href="https://www.wsj.com/articles/u-s-slaps-steel-aluminum-tariffs-on-canada-mexico-european-union-1527774283">retaliatory tariffs</a> against the United States, along with <a href="https://www.theguardian.com/business/2018/jun/01/eu-starts-retaliation-against-donald-trumps-steel-and-aluminium-tariffs">legal action</a> at the World Trade Organization.
Friends indeed. </p>
<p>It’s the same story with China, which Trump has not only made subject to the same metals tariffs but has also threatened with <a href="http://nymag.com/daily/intelligencer/2018/05/trump-moves-ahead-with-trade-sanctions-against-china.html">US$50 billion of other sanctions</a> if it doesn’t meet a series of demands. </p>
<p>Commerce Secretary Wilbur Ross recently traveled to Beijing hoping to negotiate increased Chinese purchases of American goods and a reduction of its trade deficit with the U.S. He was forced to return empty-handed after the Chinese government <a href="https://www.politico.com/story/2018/06/04/china-trade-talks-indicate-impasse-1334995">declared itself unwilling</a> to act without an American promise to drop its tariff threats. An earlier leak that China would purchase an additional <a href="https://www.nytimes.com/2018/05/18/us/politics/trump-china-trade-talks.html">$200 million</a> of U.S. exports turned out to be wildly optimistic.</p>
<p>The United States now finds itself isolated, not only from China but from its strongest allies as well. Is this a temporary step in negotiations, or is it the new normal? </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.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">U.S. Commerce Secretary Wilbur Ross returned from China with little to show for it.</span>
<span class="attribution"><span class="source">AP Photo/Andy Wong</span></span>
</figcaption>
</figure>
<h2>Shifting trade winds</h2>
<p>Of course, Trump’s proclivity for changing his mind is <a href="https://www.washingtonpost.com/opinions/trumps-one-consistent-policy-chaos/2016/12/06/f1a5a5ae-bbf7-11e6-91ee-1adddfe36cbe_story.html?utm_term=.650a63acba8a">well-known</a>, but all the same there is an understandable tendency among commentators to focus on the content of his policy choices. </p>
<p>This is especially true on trade, where Trump’s <a href="https://www.forbes.com/sites/rogeraitken/2018/03/05/u-s-president-trump-ratchets-up-protectionist-stance-but-trade-wars-have-no-winners/#391cde384292">protectionist rhetoric</a> has been exuberant, to say the least.</p>
<p>And it is true that Trump’s actions have been more anti-trade than those of his predecessors, beginning with <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/US-Withdraws-From-TPP">his withdrawal</a> from the Trans-Pacific Partnership during the first week of his presidency.</p>
<p>Nevertheless, over the last few months, Trump’s trade policy has seemed increasingly erratic. He publicly discussed <a href="https://theconversation.com/what-is-the-tpp-and-can-the-us-get-back-in-95028">reentering the Pacific trade deal</a> and just as quickly dismissed the idea. He imposed metal tariffs, immediately granted exemptions to most of America’s major exporters and then withdrew those exemptions three months later. He threatened China with new tariffs on $150 billion worth of exports, then <a href="https://www.usatoday.com/story/news/politics/2018/05/21/trump-sends-mixed-messages-tariffs-china/628507002/">suspended them</a> and risked political capital <a href="https://www.nytimes.com/2018/05/25/us/politics/trump-trade-zte.html">to save</a> the Chinese corporation ZTE. And after pushing for extraordinary trade concessions from China, he had to take a U-turn after it <a href="http://money.cnn.com/2018/05/17/news/economy/china-us-trade-talks/index.html">denied</a> that it had agreed to the most important of those demands.</p>
<h2>Two schools of thought</h2>
<p>There are two schools of thought about what is driving this policy instability.</p>
<p>Supporters of the president tend to see it as a <a href="https://www.foxbusiness.com/politics/trump-tariffs-on-us-allies-a-negotiating-tactic-for-free-trade-larry-kudlow">negotiating tactic</a>, the “<a href="https://www.thestreet.com/story/13289498/1/10-things-you-learn-reading-donald-trump-s-best-seller-the-art-of-the-deal.html">Art of the Deal</a>” on a grander scale. Trump, they believe, is trying to throw world leaders off-balance so that he can <a href="https://www.nytimes.com/2018/03/08/upshot/trumps-latest-tariff-strategy-less-trade-war-and-more-lets-make-a-deal.html">extract more trade concessions</a> from them.</p>
<p>Trump’s detractors, by contrast, see the president as hopelessly adrift, swayed this way and that by the <a href="https://www.nytimes.com/2018/06/02/business/trump-trade-china-europe-whiplash.html">varying opinions</a> of his advisers. When globalists such as Steve Mnuchin and Wilbur Ross, secretaries of the treasury and commerce, respectively, have his ear, the president <a href="https://www.nytimes.com/2018/06/03/us/politics/mnuchin-trump-trade.html">softens his stance</a> on trade. But when U.S. Trade Representative Robert Lighthizer and White House adviser Peter Navarro, economic nationalists both, are in the room, Trump <a href="https://www.wsj.com/articles/mnuchin-says-tariffs-on-hold-while-u-s-negotiates-trade-deal-with-china-1526833109">doubles down on protection</a>.</p>
<h2>Master negotiator?</h2>
<p>If U.S. observers accept that Trump’s shifting policy is part of a broader negotiating strategy, Americans can perhaps hope for a better outcome than what they see now.</p>
<p>Indeed, there is some basis in game theory for “irrational” behavior as a negotiating technique. Nobel laureate Thomas Schelling, in his 1960 classic <a href="https://www.amazon.com/Strategy-Conflict-New-Preface-Author/dp/0674840313">“The Strategy of Conflict</a>,” pointed out that negotiators with a reputation for overreacting when their demands aren’t met can be in a <a href="https://medium.com/@GabeNicholas/trump-and-the-strategy-of-irrationality-4344d7f7e37d">stronger position</a> to extract concessions.</p>
<p>If a country can convince its opponent of its willingness to follow through on threats even when they are self-destructive, the country can more effectively compel changes in behavior. Moreover, if an opponent doubts the ability of a country’s leaders to understand or carefully consider the consequences of the opponent’s threats, the country is, ironically, in a <a href="http://slantchev.ucsd.edu/courses/ps142j/lectures/credible-commitments.pdf">stronger negotiating position</a>. This “irrationality” approach was famously termed the <a href="https://historynewsnetwork.org/article/17183">“madman strategy”</a> by Richard Nixon and played a role in <a href="https://www.nytimes.com/2011/08/06/opinion/the-madman-theory.html">motivating his escalation</a> of the Vietnam War during the Paris negotiations.</p>
<p>Perhaps, then, Americans are witnessing the early stages of a negotiating strategy that will ultimately bear fruit.</p>
<h2>Or malleable amateur?</h2>
<p>Even in this optimistic scenario, however, the president’s approach seems too myopic. </p>
<p>After all, international trade negotiations do not play by the same rules as military diplomacy, where much of this theory was developed. Such techniques might have a greater chance of working with Iran and North Korea, but of course the risks of escalation here are even more severe.</p>
<p>Trade is different because it is mutually beneficial and also because it requires cooperation that is <a href="http://www.ir.rochelleterman.com/sites/default/files/Oye%201985.pdf">sustained over time</a>. A country’s <a href="https://press.princeton.edu/titles/1322.html">reputation for stable compliance</a> with its agreements is thus put at a premium; otherwise the country risks being shunned by potential partners. To wrest trade concessions from America’s partners may be satisfying, but if it is accomplished at the cost of weakening the world trading system, it is hardly worth the price.</p>
<h2>The costs of instability</h2>
<p>If, on the other hand, Trump’s unstable policy is a symptom of indecision in the face of the competing agendas of his aides, the world economy may be in for a bumpy ride. Irrational behavior can be used selectively as a negotiating technique but <a href="http://foreignpolicy.com/2017/04/18/trumps-madman-theory-isnt-strategic-unpredictability-its-just-crazy/">has a high cost</a> if not applied carefully and strategically. If a country’s negotiating partners doubt its willingness or ability to follow through on its promises, cooperation becomes impossible.</p>
<p>In the final analysis, a <a href="https://www.bostonglobe.com/news/nation/2016/12/20/donald-trump-and-madman-theory/V2a8etfjkTfFzf1S4G7IbO/story.html">stable and rule-based</a> trading system is in the United States’ long-term interest. Inconsistent and aggressive trade policies, whether produced by a master negotiator or a malleable amateur, risk poisoning the mutual trust necessary to make such a system function.</p>
<p>Some are <a href="https://twitter.com/byHeatherLong/status/1004426052150624257">now saying</a> that President Trump is in the early stages of reconsidering America’s membership in the WTO. Hopefully the president will come to understand what is at stake soon, before it is too late.</p><img src="https://counter.theconversation.com/content/97836/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>A political scientist and economist explores the causes and consequences of Trump’s scattershot trade policy.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/956402018-04-29T20:12:45Z2018-04-29T20:12:45ZWhy kickstarting small business exports could boost stagnant wages<figure><img src="https://images.theconversation.com/files/216591/original/file-20180427-175061-7tnlla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Large companies control 88% of the agricultural export market.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Prioritising exports by small and medium businesses would boost wages, according to our work for an <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/Freetradeagreement/Terms_of_Reference">ongoing parliamentary inquiry</a>. </p>
<p>Smaller Australian businesses have <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5368.0.55.006">disproportionately low levels of exports</a>. This is despite being more <a href="https://www.business.qld.gov.au/running-business/finances-cash-flow/managing-money/monitoring-performance/measuring-profitability">profitable</a> and <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/8155.0Main+Features12015-16?OpenDocument">productive</a> than larger enterprises in most of the sectors we analysed. </p>
<p>Smaller Australian businesses also <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/8155.0">pay lower-than-average wages</a>. As wages are <a href="https://static.treasury.gov.au/uploads/sites/1/2017/11/p2017-t237966.pdf">linked to the price and sales of goods and services</a>, increasing exports should boost the pay packets for those employed by small businesses. </p>
<p>In fact, it is <a href="https://industry.gov.au/Office-of-the-Chief-Economist/Research-Papers/Documents/2015-Research-Paper-2-Impact-of-international-trade-on-employment.pdf">well established</a> that export-oriented industries pay higher average wages.</p>
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<p>This chart shows that in all sectors the average wage of workers in small businesses is below that of the sector averages. Average wages in medium business were closer to the sector average, with a notable differential appearing in retail and agriculture. </p>
<p>The agricultural sector is an egregious example, where if you work for a small business you are likely to earn less than one-third of what you would for a large firm – A$10,000 as opposed to over A$36,000 a year on average. </p>
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<em>
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Read more:
<a href="https://theconversation.com/australia-cant-afford-to-forget-smaller-businesses-when-negotiating-trade-deals-92677">Australia can't afford to forget smaller businesses when negotiating trade deals</a>
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<p>In our analysis we looked at Australia’s bilateral free trade agreements with major trade partners in the Asia-Pacific region (the USA, China, Japan, South Korea, Singapore and New Zealand) across key economic sectors (agriculture, manufacturing, mining, retail trade and transportation) in the past decade. </p>
<p>The data show small businesses largely under-utilise free trade agreements. Large enterprises are responsible for 100% of mining exports, 93% in manufacturing, 88% in agriculture, 81% in transportation and 72% in retail.</p>
<p>However, we found no evidence to support the <a href="http://www.pc.gov.au/research/supporting/firm-size">Productivity Commission’s proposition</a> that to succeed internationally an enterprise must be of a certain scale and scope. </p>
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<p>The intuitive explanation for low exports by small and medium businesses is that they aren’t as productive as larger firms. Among other things, smaller businesses are <a href="https://www.rba.gov.au/publications/workshops/other/small-bus-fin-roundtable-2012/pdf/01-overview.pdf">more labour-intensive</a>. </p>
<p>But this explanation does not gel with how <a href="http://www.pc.gov.au/research/supporting/firm-size">strongly entrenched</a> smaller firms are in the Australian economy.</p>
<p>Between 2012 and 2016 most small enterprises (and several medium-sized enterprises) had greater <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5676.0">operating profit margins</a> than their larger competitors in the sectors we assessed.</p>
<p>By looking at the contribution businesses make in their industry, known as “industry value added”, we can also see that small and medium businesses are the lifeblood of certain sectors, particularly agriculture and retail. </p>
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<p>A comparison of the value added by small businesses in these sectors with their exports shows that the exports of small Australian businesses are disproportionately small.</p>
<p>For instance, there were <a href="https://www.ruralbank.com.au/assets/responsive/pdf/publications/trade-report-17.pdf">A$50 billion of agricultural exports</a> in the last financial year. Large enterprises captured 88% of this export market despite adding only 4% to the overall industry value. </p>
<p>If smaller Australian agricultural companies could just double their export share this would increase productivity, employment and wages. This would benefit struggling rural communities in particular. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/free-trade-agreements-fail-to-boost-australian-agriculture-and-food-manufacturing-47576">Free trade agreements fail to boost Australian agriculture and food manufacturing</a>
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<p>As we have shown, smaller Australian businesses are more productive than large firms. But they maintain disproportionately low levels of exports and wages. We found that under-utilisation of free trade agreements, rather than lack of access to them, is the fundamental cause of the lower exports. </p>
<p>This suggests that Australia’s trade policies should prioritise international trade and foreign investment instruments for small businesses to <a href="https://static.treasury.gov.au/uploads/sites/1/2017/11/p2017-t237966.pdf">stimulate domestic wages</a> and fairly distribute the <a href="https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Reaping-the-Benefits-from-Global-Value-Chains-43311">gains of global value chains</a>.</p>
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Read more:
<a href="https://theconversation.com/the-hidden-resource-agenda-within-australias-asian-free-trade-agreements-9773">The hidden resource agenda within Australia’s Asian free trade agreements
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<p>Public policies should analyse free trade agreements in terms of their contribution to the actual productivity of enterprises by sector, rather than the potential to expand the total market value of exports. </p>
<p>In other words, the best use of international trade is not touting banalities like “this free trade agreement is worth such and such”. Rather, it is by calculating in what sectors, and in what markets, Australian enterprises actually gain or lose from international trade.</p>
<p>With transparent information, based on substantial economic evidence, governments could at last find political legitimacy to implement systemic <a href="http://www.oecd.org/site/tadicite/48133815.pdf">trade adjustment</a> measures. This would reallocate resources within and between sectors, from large to small and medium export-oriented businesses.</p><img src="https://counter.theconversation.com/content/95640/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 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>Smaller Australian businesses are more productive than larger ones, but have disproportionately low levels of exports and wages.Giovanni Di Lieto, Lecturer of international trade law, Monash Business School, Monash UniversityDavid Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash 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>
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<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>
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<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/938992018-03-29T10:30:17Z2018-03-29T10:30:17Z4 charts show why Trump’s tariffs will hurt everyone – not just China<p>On March 22, the Trump administration lobbed its <a href="https://theconversation.com/trumps-go-it-alone-approach-to-china-trade-ignores-wtos-better-way-to-win-93918">second volley</a> in a planned escalation of punitive trade measures against America’s trading partners.</p>
<p>The latest salvo targets China, the <a href="https://www.census.gov/foreign-trade/statistics/highlights/top/top1801cm.html">largest U.S. trading partner</a>, and covers a much wider range of products than the first set of tariffs, which <a href="https://www.reuters.com/article/us-usa-trade-steel/trump-temporarily-excludes-eu-six-other-allies-from-steel-tariffs-idUSKBN1GZ0ET">focused on steel and aluminum</a>.</p>
<p><a href="https://theconversation.com/trumps-60-billion-in-china-tariffs-will-create-more-problems-than-they-solve-93897">There are many reasons</a> why this is a bad idea.</p>
<p>The president, however, believes that China has unfairly exploited U.S. workers and businesses and must be punished. Rather than take the more prudent approach and work with <a href="https://www.bloomberg.com/news/articles/2017-03-15/these-are-the-six-biggest-wto-disputes-you-need-to-care-about">other countries</a> that have been affected by Chinese exports, Trump has instead chosen to strike a blow that will hit not just China but the global economy as well. </p>
<p>That’s because the complexity and interconnectedness of the global trading system make it nearly impossible to narrowly target specific countries, as the U.S.-China trade relationship demonstrates.</p>
<h2>Chinese exports to the US</h2>
<p>China exports US$386 billion worth of goods to the U.S. every year, most notably a variety of manufactured products that most Americans associate with the “Made in China” label. </p>
<p>These trade flows are dominated by computers and other electronics, which constitute 45 percent of all exports. Computers alone represent 11 percent. </p>
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<h3>Top Chinese exports to the U.S. in 2016</h3>
<iframe height="400" width="100%" src="https://atlas.media.mit.edu/en/visualize/embed/tree_map/hs92/export/chn/usa/show/2016/?controls=false" frameborder="1"></iframe>
<figcaption>Source: <a href="https://atlas.media.mit.edu/en/">The Observatory of Economic Complexity.</a></figcaption>
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<h2>‘Foreign’ inputs</h2>
<p>These complex electronics products are comprised of dozens of parts and components that are sourced from many countries, including the U.S. </p>
<p>To get a sense of how much is actually made in China and how much comes from elsewhere, economists calculate the share of “domestic content” in the goods versus “foreign content.”</p>
<p>It turns out that China’s exports of manufactured products <a href="https://www.researchgate.net/profile/Zhi_Wang11/publication/228679803_How_much_of_China's_exports_is_really_made_in_China_Assessing_domestic_and_foreign_added_value_in_gross_exports/links/0deec5213bd3bc57f6000000.pdf">consist nearly equally</a> of foreign and domestic content. But for high-technology products, such as electronics, around two-thirds are foreign. </p>
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<p>In other words, a computer that is “Made in China” is, in fact, mostly made elsewhere. </p>
<p>So who gets hurt when the U.S. imposes a tariff on Chinese computers? A lot of people – including Americans. </p>
<p>Many products that are made in China were conceived of and sold by American companies – the Apple iPhone being a prominent example. In these cases, American workers provide a range of high-value services as inputs into the final product, such as the design, marketing and management provided by Apple employees in Cupertino. More than that, American companies <a href="https://www.lifewire.com/where-is-the-iphone-made-1999503">make many of the iPhone’s components</a>, including the camera, glass screen, touchscreen controller and the Wi-Fi chip.</p>
<h2>A boon for US service workers</h2>
<p>The upside to all this is that the recent growth in global manufacturing output has been a boon for American service workers. In fact, U.S. services exports to China doubled from 2011 to 2015.</p>
<p>On the other hand, this provides a stark illustration of how a tariff on Chinese goods could quickly come back to hit U.S. workers. </p>
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<p>And it is not just the direct trade links that matter. Trade also has important indirect effects on the economy by bringing countries closer together in other ways. </p>
<p>A case in point is Chinese tourism to the U.S., which has risen rapidly in recent years. So much so, in fact, that “travel services” is now the largest U.S. export to China. </p>
<h2>Students: Another kind of export</h2>
<p>A final underappreciated benefit to the U.S. from growing cultural and economic ties has been soaring Chinese enrollment in American universities.</p>
<p>Enrollment quintupled to 351,000 in 2016 from a decade earlier, with the Chinese now representing about a third of all international students in the U.S., up from 12 percent. </p>
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<p>Again, this represents a type of U.S. export to China and can be directly linked to deepening economic integration. In this case, the benefits to the U.S. are both tangible – admissions fees – and intangible – more innovation and knowledge sharing.</p>
<p>In summary, the world is highly integrated, in ways we often don’t see. As a result, when trade policy is made without careful thought, a tariff on flat-screen TVs can lead to fewer visitors to the Grand Canyon or the loss of marketing jobs in Cleveland. And we are all poorer for it.</p><img src="https://counter.theconversation.com/content/93899/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greg Wright 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>A closer look at the US-China trade relationship shows why Trump’s ‘targeted’ tariffs are likely to hurt American workers and businesses as well.Greg Wright, Assistant Professor of Economics, University of California, MercedLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/938272018-03-26T09:06:09Z2018-03-26T09:06:09ZWhy Africa’s free trade area offers so much promise<figure><img src="https://images.theconversation.com/files/211715/original/file-20180323-54878-d9bedj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African leaders meet in Kigali to sign the continent's free trade agreement.</span> <span class="attribution"><span class="source">Paul Kagame/Flickr</span></span></figcaption></figure><p>African leaders have just signed a framework establishing the African Continental Free Trade Area, the <a href="https://www.cnbc.com/2018/03/20/africa-leaders-to-form-largest-free-trade-area-since-the-wto.html">largest free trade agreement</a> since the creation of the World Trade Organisation. </p>
<p>The free trade area aims to create a single market for goods and services in Africa. By 2030 the market size <a href="https://www.brookings.edu/opinions/capturing-africas-high-returns/">is expected</a> to include 1.7 billion people with over USD$ 6.7 trillion of cumulative consumer and business spending – that’s if all African countries have joined the free trade area by then. Ten countries, including Nigeria, have yet to sign up.</p>
<p>The <a href="https://au.int/en/ti/cfta/about">goal</a> is to create a </p>
<blockquote>
<p>single continental market for goods and services, with free movement of business persons and investments.</p>
</blockquote>
<p>The agreement has the potential to deliver a great deal for countries on the continent. The hope is that the trade deal will trigger a virtuous cycle of more intra African trade, which in turn will drive the <a href="https://unhabitat.org/books/structural-transformation-in-developing-countries-cross-regional-analysis/">structural transformation</a> of economies – the transition from low productivity and labour intensive activities to higher productivity and skills intensive industrial and service activities – which in turn will produce better paid jobs and make an impact on poverty. </p>
<p>But signing the agreement is only the beginning. For it to come into force, 22 countries must ratify it. Their national legislative bodies must approve and sanction the framework formally, showing full commitment to its implementation. Niger President Issoufou Mahamadou, who has been championing the process, aims to have the ratification process completed by January 2019. </p>
<h2>Cause and effect</h2>
<p>Some studies have shown that by creating a pan-African market, intra-Africa trade could increase by <a href="https://www.ictsd.org/bridges-news/bridges-africa/news/launch-of-the-continental-free-trade-area-new-prospects-for-african">about 52%</a> by 2022. Better market access creates economies of scale. Combined with appropriate industrial policies, this contributes to a diversified industrial sector and growth in manufacturing value added. </p>
<p>Manufacturing represents only about <a href="https://data.worldbank.org/indicator/NV.IND.MANF.ZS">10% of total GDP in Africa</a> on average. This falls well below other developing regions. A successful continental free trade area could reduce this gap. And a bigger manufacturing sector will mean more well-paid jobs, especially for young people. This in turn will help poverty alleviation.</p>
<p>Industrial development, and with it, more jobs, is desperately needed in Africa. Industry represents <a href="https://data.worldbank.org/indicator/SL.IND.EMPL.ZS">one-quarter to one-third of total job creation</a> in other regions of the world. And a young person in Africa is <a href="http://acetforafrica.org/highlights/unemployment-in-africa-no-jobs-for-50-of-graduates/">twice as likely to be unemployed when he or she becomes an adult</a>. This is a particularly stressful situation given that over <a href="http://www.unesco.org/new/en/unesco/events/prizes-and-celebrations/celebrations/international-days/world-radio-day-2013/statistics-on-youth/">70% of sub-Saharan Africa’s population is below age 30</a>. </p>
<p>In addition, <a href="http://www.africaneconomicoutlook.org/en/home">70% of Africa’s youth live on less than US $2 per day</a>.</p>
<p>The continental free trade area is expected to offer</p>
<blockquote>
<p>substantial opportunities for industrialisation, diversification, and <a href="https://www.brookings.edu/blog/africa-in-focus/2018/02/02/foresight-africa-viewpoint-africas-bold-move-towards-integration-the-continental-free-trade-agreement/">high-skilled</a> employment in Africa. </p>
</blockquote>
<p>The single continental market will offer the opportunity to accelerate the manufacture and intra-African trade of value-added products, moving from commodity based economies and exports to economic diversification and high-value exports. </p>
<p>But, to increase the impact of the trade deal, industrial policies must be put in place. These must focus on productivity, competition, diversification, and economic complexity. </p>
<p>In other words, governments must create enabling conditions to ensure that productivity is raised to international competitiveness standards. The goal must be to ensure that the products manufactured in African countries are competitively traded on the continent and abroad, and to diversify the range and sophistication of products and services.</p>
<h2>Drivers of manufacturing</h2>
<p>Data shows that the most economically diverse countries are also the most successful.</p>
<p>In fact, <a href="http://atlas.cid.harvard.edu/learn/glossary">diversification</a> is critical as “countries that are able to sustain a diverse range of productive know-how, including sophisticated, unique know-how, are able to produce a wide diversity of goods, including complex products that few other countries can make.</p>
<p>Diverse African economies such as South Africa and Egypt, are likely to be the drivers of the free trade area, and are likely to benefit from it the most. These countries will find a large continental market for their manufactured products. They will also use their know-how and dense industrial landscape to develop innovative products and respond to market demand.</p>
<p>But the agreement on its own won’t deliver results. Governments must put in place policies that drive industrial development, particularly manufacturing. Five key ones stand out:</p>
<p><strong>Human capital:</strong> A strong manufacturing sector needs capable, healthy, and skilled workers. Policymakers should adjust curriculum to ensure that skills are adapted to the market. And there must be a special focus on young people. Curriculum must focus on skills and building capacity for entrepreneurship and self-employment. This should involve business training at an early age and skills upgrading at an advanced one. This should go hand in hand with promoting science, technology, engineering, entrepreneurship and mathematics as well as vocational and on-the-job training. </p>
<p>Policymakers should also favour the migration of highly skilled workers across the continent.</p>
<p><strong>Cost:</strong> Policymakers must bring down the cost of doing business. The barriers include energy, access to roads and ports, security, financing, bureaucratic restrictions, corruption, dispute settlement and property rights. </p>
<p><strong>Supply network:</strong> Industries are more likely to evolve if competitive networks exist. Policymakers should ease trade restrictions and integrate regional trade networks. In particular, barriers for small and medium-size businesses should be lifted. </p>
<p><strong>Domestic demand:</strong> Policymakers should offer tax incentives to firms to unlock job creation, and to increase individual and household incomes. Higher purchasing power for households will increase the size of the domestic market. </p>
<p><strong>Resources:</strong> Manufacturing requires heavy investment. This should be driven by the private sector. Policymakers should facilitate access to finance, especially for small and medium enterprises. And to attract foreign direct investment, policymakers should address perceptions of poor risk perception. This invariably scares off potential investors or sets excessive returns expectations. </p>
<h2>Increased productivity</h2>
<p>The continental free trade area facilitates industrialisation by creating a continental market, unlocking manufacturing potential and bolstering an international negotiation bloc.</p>
<p>Finally, the continental free trade area will also provide African leaders with a greater negotiating power to eliminate barriers to exporting. This will help prevent agreements with other countries, and trading blocs, that are likely to hurt exports and industrial development.</p><img src="https://counter.theconversation.com/content/93827/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Prof. Landry Signé 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>Continental free trade area’s potential impact includes boosting intra-Africa trade, manufacturing exports, job creation and poverty alleviation.Prof. Landry Signé, Distinguished Fellow at Stanford University's Center for African Studies, David M. Rubenstein Fellow at the Global Economy and Development and Africa Growth Initiative at the Brookings Institution, and Young Global Leader of the World Economic Forum, Stanford UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/938972018-03-23T21:44:00Z2018-03-23T21:44:00ZTrump’s $60 billion in China tariffs will create more problems than they solve<figure><img src="https://images.theconversation.com/files/211781/original/file-20180323-54872-ja8es9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Business such as California winemakers could be hurt by the new tariffs as a result of retaliation.</span> <span class="attribution"><span class="source">AP Photo/Mark Schiefelbein</span></span></figcaption></figure><p>After spending <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/august/ustr-announces-initiation-section">seven months investigating</a> whether China is engaged in unfair trade practices, the <a href="https://www.nytimes.com/2018/03/22/us/politics/trump-will-hit-china-with-trade-measures-as-white-house-exempts-allies-from-tariffs.html">Trump administration announced</a> March 22 that it will impose tariffs on as much as US$60 billion in Chinese imports. </p>
<p>The tariffs are meant to address two problems: intellectual property theft by China and a steep and persistent trade deficit. </p>
<p>As an <a href="https://scholar.google.com/citations?user=B744wv0AAAAJ&hl=en&oi=ao">economist and expert</a> in international trade, I don’t see how the proposed tariffs will resolve either one. In fact, it’s more likely that they will create two new problems by hurting both consumers and businesses. </p>
<h2>IP theft and trade deficits</h2>
<p>The administration formally justified its tariffs by invoking Section 301 of the <a href="https://legcounsel.house.gov/Comps/93-618.pdf">Trade Act of 1974</a>, which allows the president to impose tariffs on countries in violation of international trade deals. </p>
<p>In particular, the Trump administration accused China of engaging in intellectual property theft <a href="https://www.wto.org/english/tratop_e/trips_e/trips_e.htm">forbidden by World Trade Organization agreements</a>. </p>
<p>Intellectual property theft <a href="http://www.ipcommission.org/index.html">has been a major complaint</a> of American companies doing business in China for decades. Sometimes this theft occurs through illicit means, such as industrial espionage. It also occurs through legal channels, such as when U.S. companies are forced to form a joint venture with a Chinese business. In other cases, technology transfers are a precondition of doing business in China. </p>
<p>Altogether, the U.S. trade representative <a href="https://ustr.gov/sites/default/files/USTR%20301%20Fact%20Sheet.pdf">estimates that these policies cost U.S. businesses</a> around $50 billion a year.</p>
<p>The other problem that <a href="http://www.bbc.com/news/election-us-2016-36185012">has long irked</a> the president is the significant trade deficit. Since the U.S. normalized trade relations with China in 2000, the <a href="https://www.census.gov/foreign-trade/balance/c5700.html">deficit ballooned</a> from less than $84 billion to over $375 billion in 2017. </p>
<p>This “China shock” of cheap goods <a href="https://www.annualreviews.org/doi/pdf/10.1146/annurev-economics-080315-015041">has caused considerable disruption</a> in the U.S. economy. The labor market has been surprisingly slow to adjust, leading affected workers to earn far less money over a lifetime. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/211782/original/file-20180323-54878-1xuow8l.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">President Trump signs a presidential memorandum imposing tariffs and investment restrictions on China.</span>
<span class="attribution"><span class="source">AP Photo/Evan Vucci</span></span>
</figcaption>
</figure>
<h2>The wrong solutions</h2>
<p>It remains to be seen, however, whether the tariffs will alleviate either problem. </p>
<p>The administration’s calculation seems to be that China will back down on intellectual property theft if faced with less access to U.S. markets. </p>
<p>But China is less dependent on U.S. trade now than it was a decade ago, making its economy resilient to these sorts of punitive measures. The U.S. <a href="https://wits.worldbank.org/CountryProfile/en/Country/CHN/StartYear/2006/EndYear/2016/TradeFlow/Export/Partner/USA/Indicator/XPRT-PRTNR-SHR">accounted for</a> 18.4 percent of Chinese exports in 2016, down from 21 percent in 2006. </p>
<p>The U.S. likely would have better luck resolving this problem at the WTO, which China joined in 2001 and must abide by its rulings. The best part about a WTO ruling is that it would affect all of China’s exports, not just those to the U.S.</p>
<p>Similarly, the trade deficit is unlikely to be resolved through higher tariffs. The primary cause of the persistent trade deficit – <a href="https://www.wsj.com/articles/u-s-trade-gap-highest-in-nine-years-in-december-1517923918">$566 billion in 2017</a> – is an <a href="http://policonomics.com/net-capital-outflow/">imbalance between savings and investment</a> in the U.S. economy. </p>
<p>The U.S. personal savings rate <a href="https://www.bloomberg.com/news/articles/2018-01-26/why-the-savings-rate-is-a-reason-to-worry-about-2018-u-s-growth">has fallen steadily since the late 1970s</a>. At the same time, the government has run persistently large budget deficits, both of which have increased the level of borrowing in the U.S. economy. </p>
<p>As a result, foreign investment, particularly from China, has become increasingly critical to financing U.S. economic growth. This is great news in terms of helping Americans buy cheap Chinese goods and the government finance its budget deficit. But all that foreign cash going into the financial market isn’t being used to buy the stuff Americans are producing, like Harley Davidson motorcycles and Iowa corn. </p>
<p>This results in lower exports and a higher trade deficit. Tariffs will not change this reality.</p>
<h2>Two new problems</h2>
<p>While the full details of the tariffs have yet to be released, it’s clear they’ll cause at least two immediate problems. </p>
<p>One is that U.S. consumers will be hurt. The typical consumer <a href="https://www.stlouisfed.org/on-the-economy/2017/may/impact-chinese-imports-us-jobs">has about $260 in extra purchasing power</a> as a result of trade with China. Those benefits, which disproportionately go toward working-class Americans, will fall due to the U.S. tariffs, as American importers will pass some of their increased costs along to consumers.</p>
<p>Secondly, American companies that export to China will be exposed to retaliation in the form of tariffs on U.S.-made goods. Shortly after Trump’s announcement, China released its <a href="https://www.nytimes.com/2018/03/23/business/china-tariffs-response.html">own policy statement targeting $3 billion worth of U.S. exports</a>. </p>
<p>Particularly vulnerable to Chinese retaliation are the pork and soybean industries, which are concentrated in the Trump-friendly Midwest. This list could grow if a trade war with China escalates.</p>
<p>A broader concern is that, by acting unilaterally, the Trump administration is undermining the broader system that has facilitated the growth of international trade and adjudicated grievances between countries since World War II. </p>
<p>While far from perfect, organizations such as the WTO have limited the scope of trade wars <a href="https://www.history.com/news/trade-war-great-depression-trump-smoot-hawley">since the chaos of the 1930s</a>. Failing to uphold these institutions could have major consequences in the future.</p><img src="https://counter.theconversation.com/content/93897/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Hauk has previously received funding from the Center for International Business Education and Research, which in turn is funded by a grant from the U.S. Department of Education. </span></em></p>While the tariffs are unlikely to stem Chinese intellectual property theft or reverse the steep trade deficit, they are certain to hurt American companies and consumers.William Hauk, Associate Professor of Economics, University of South CarolinaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/926772018-03-12T19:00:55Z2018-03-12T19:00:55ZAustralia can’t afford to forget smaller businesses when negotiating trade deals<p>Politicians <a href="https://www.theaustralian.com.au/national-affairs/four-in-five-are-using-ftas-with-china-and-south-korea-ciobo/news-story/85053f09805c14e111907e353ede4b22">often cite</a> the large market value of exports as justification for free trade agreements. But this misses a fundamental point about trade - we benefit most when we focus on exporting the goods and services we are the most efficient at producing, rather than simply increasing the absolute value of our exports.</p>
<p>It is a firm’s productivity, not the market value of its exports, that signals success in international trade. In this regard, Australian small and medium-sized businesses have demonstrated considerable longevity and importance. </p>
<p>Yet these businesses account for <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1516/Perform">less than 5% of our total exports</a>. </p>
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<p>Traditionally, smaller businesses were believed to be <a href="http://documents.worldbank.org/curated/en/651051467990379863/Large-firms-are-more-productive-offer-higher-wages-and-more-training">less productive</a> than larger ones.</p>
<p>However, a business’s <a href="http://www.pc.gov.au/research/supporting/firm-size">success at domestic sales</a> is also recognised as a major contributing factor to success in export markets. </p>
<p>After all, if you are not productive at home, you will not survive long enough to look abroad. Australian small and medium-sized businesses contribute more than 50% of national output, despite their relatively small contribution to total exports. </p>
<p>This huge differential is evident in several sectors. The Australian agricultural, forestry and fishing sector provides such an example. In terms of domestic sales, approximately 92% of this sector is made up of sales from small and medium businesses. </p>
<p>Yet, these small businesses contribute only 14% of the exports from this sector.</p>
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<p>With such a high differential between domestic sales and exports, one must consider what more can be done to foster exports by Australia’s small and medium businesses? </p>
<p>In economics, the answer is found within the concept of <a href="https://www.investopedia.com/terms/c/comparativeadvantage.asp">comparative advantage</a>. This says that a business will gain from international trade if it focuses its efforts on exporting a good or service that it produces more efficiently than its competitors. </p>
<p>This has been <a href="https://www.weforum.org/agenda/2014/11/how-should-governments-promote-exports/">shown to be best achieved</a> through government policies that encourage foreign direct investment abroad, integration of value chains, and domestic regulations that support greater, not lesser, international trade. </p>
<p>This is often forgotten by policy makers who focus more on the big numbers than the big picture.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-hidden-resource-agenda-within-australias-asian-free-trade-agreements-9773">The hidden resource agenda within Australia’s Asian free trade agreements
</a>
</strong>
</em>
</p>
<hr>
<p>The importance of comparative advantage underpins the notion that Australia’s agriculture, forestry and fishing sector is <a href="https://theconversation.com/farmers-and-services-industry-the-winners-under-the-revised-trans-pacific-partnership-trade-deal-90619">the big winner</a> from the revitalised Trans-Pacific Partnership (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership). </p>
<p>But the same is not true of Australian exporters of vegetables or other food products. </p>
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<h2>Who gains from trade?</h2>
<p>When you focus the debate of free trade on the big numbers and not the big picture, the debate on free trade, one way or another, focuses on the validity of the fundamental economic principle that international trade can make everyone better off - also known as “<a href="https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/gains-from-trade-tutorial/v/comparative-advantage-specialization-and-gains-from-trade">gains from trade</a>”. </p>
<p>This assumption does not always hold true and every now and then, special interest groups will ensure that a wave of free market or <a href="https://theconversation.com/three-charts-on-g20-countries-stealth-trade-protectionism-80678">protectionist sentiment</a> will sweep across policy making circles. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/free-trade-agreements-fail-to-boost-australian-agriculture-and-food-manufacturing-47576">Free trade agreements fail to boost Australian agriculture and food manufacturing</a>
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</em>
</p>
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<p>To the ordinary, hard-working Australian small and medium business owner, not engaged in special interest politics, the questions of “<a href="https://www.theaustralian.com.au/national-affairs/four-in-five-are-using-ftas-with-china-and-south-korea-ciobo/news-story/85053f09805c14e111907e353ede4b22">how many eligible exports</a> are covered by a free trade agreement?” are secondary considerations. </p>
<p>A street-smart business owner knows that it is impossible to produce all goods and services efficiently, nor can all be exported. They are rightly more interested in how trading internationally will contribute to the business’s bottom line. </p>
<p>Of greater immediate concern for Australia’s small and medium businesses is the fall out from a <a href="https://theconversation.com/in-the-economic-power-struggle-for-asia-trump-and-xi-jinping-are-switching-policies-90173">trade war between our major trading partners</a>.</p>
<p>If you are an Aussie small and medium business owner, you are accustomed to being a battler. Whether or not more is done to foster exports, in the current international climate, staying nimble and focusing on domestic sales may not be such a bad idea.</p><img src="https://counter.theconversation.com/content/92677/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>Smaller businesses contribute a huge amount of Australia’s national output but a tiny proportion of our exports.David Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/874772017-11-16T01:39:20Z2017-11-16T01:39:20ZTrump’s ‘America first’ trade policy ignores key lesson from Great Depression<figure><img src="https://images.theconversation.com/files/194885/original/file-20171115-19782-b2ncvz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump will soon learn the costs of going it alone on trade.</span> <span class="attribution"><span class="source">AP Photo/Andrew Harnik</span></span></figcaption></figure><p>President Donald Trump <a href="http://abcnews.go.com/International/wireStory/trump-asia-trade-rules-changed-watch-51131335">declared</a> his nearly two-week trip through Asia “tremendously successful,” but economic history should make us more skeptical. </p>
<p>During the trip, the president continued to promote his so-called <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">“America first” trade policy</a>. He is orienting the country distinctly toward protectionism and claiming that unilateralism in trade is good for America.</p>
<p>Here is the problem: President Trump’s <a href="http://www.businessinsider.com/trump-trade-policy-agenda-2017-3">approach to trade</a> seems to be based on a false understanding of how the global economy works, one that also plagued American policymakers nearly a century ago. The administration has forgotten an important lesson of the Great Depression, and <a href="http://foreignpolicy.com/2017/03/06/economists-take-aim-at-trump-trade-theory-again-peter-navarro-bilateral-multilateral-trade-deals-china-germany-national-security/">virtually all economists</a> <a href="https://www.voanews.com/a/trump-trade-policy-loser-economists-contend/3323997.html">agree</a> that this could have unfortunate consequences for the U.S. and the world. </p>
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<img alt="" src="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If Trump puts ‘America first’ in trade, other countries will follow. And that’s bad news for everyone.</span>
<span class="attribution"><span class="source">Hadrian/Shutterstock.com</span></span>
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<h2>America and the global economy</h2>
<p>Trump’s “America first” orientation <a href="http://time.com/4386335/donald-trump-trade-speech-transcript/">assumes</a> that the United States, as the world’s dominant actor, can behave freely and independently in trade. </p>
<p>Unfortunately for the administration, America’s top economic position does not shield it from the dire consequences that unilateral trade policy can provoke. The constraints on U.S. action result from the basic nature of the international economy and from America’s <a href="https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci18-1.pdf">declining dominance</a> of the world trade system. </p>
<p>It is a standard principle of economics that all individual actors exist within a system. Any action taken by one actor will likely result in a response from others. This means that wise governments, in considering which policies to adopt, must make <a href="https://www.economist.com/news/economics-brief/21705308-fifth-our-series-seminal-economic-ideas-looks-nash-equilibrium-prison">difficult calculations</a> about how their actions will interact with those of others.</p>
<p>“America first” fails to make these calculations. It disregards how America’s trading partners will respond to the new U.S. protectionism – which is also what American lawmakers ignored during the Great Depression.</p>
<h2>‘Beggar thy neighbor’</h2>
<p>Before the 1930s, America’s trade policy was generally set unilaterally by Congress – that is, without the international negotiations used today. </p>
<p>Lawmakers, already in a <a href="http://www.nber.org/papers/w2001">protectionist mood</a>, responded to the pain of the Great Depression by passing the infamous <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>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=809&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=809&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=809&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1016&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1016&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1016&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Senator Reed Smoot co-sponsored the famous act that bears his name.</span>
<span class="attribution"><span class="source">Everett Historical/Shutterstock.com</span></span>
</figcaption>
</figure>
<p>Meant in part to ease the effects of the Depression by protecting American industry and agriculture from foreign competition, the act instead helped prolong the downturn. <a href="https://press.princeton.edu/titles/9430.html">Many U.S. trading partners reacted</a> by <a href="http://www.nber.org/chapters/c6899.pdf">raising their own tariffs</a>, which contributed <a href="http://www.mitpressjournals.org/doi/abs/10.1162/003465398557410">significantly</a> to shutting down world trade.</p>
<p>Fortunately, America and the world learned a lesson from this experience. With the <a href="http://www.nber.org/chapters/c6899.pdf">Reciprocal Trade Agreements Act of 1934</a> and its successors, which granted the president authority to reach tariff reduction agreements with foreign governments, U.S. trade policy came to be global and strategic. This new approach was institutionalized at the international level with the creation of the <a href="https://www.wto.org/english/res_e/booksp_e/agrmntseries2_gatt_e.pdf">General Agreement on Tariffs and Trade</a> in 1948 and its successor, the World Trade Organization, in 1995.</p>
<p>The basic principle of these agreements is <a href="https://theconversation.com/why-the-wto-still-matters-34624">reciprocity</a> – that each country will agree to liberalize its trade to the extent that other countries liberalize theirs. The approach uses international negotiations to <a href="https://www.jstor.org/stable/2706411?seq=1#page_scan_tab_contents">overcome protectionist political pressures</a> and recognizes that trade is a global phenomenon that generates national interdependence.</p>
<h2>Dangers of ignoring history</h2>
<p>The dangers of ignoring history are only beginning to manifest themselves, but they can be seen in several recent developments that bode ill for us all.</p>
<p>One of the Trump administration’s <a href="https://theconversation.com/how-the-tpps-demise-threatens-us-national-security-and-pax-americana-67514">first actions</a> was to withdraw the United States from the <a href="https://theconversation.com/us/topics/transpacific-partnership-1882">Trans-Pacific Partnership</a>. This agreement, which was a major initiative of the Obama administration, would have created the <a href="https://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html">largest economic bloc</a> in the world by linking America’s economy with those of 11 other Pacific nations. It would also have created an American-led, liberal bulwark in Asia against any Chinese challenge to the regional economic order.</p>
<p>Withdrawing from the agreement denied American exporters enhanced access to foreign markets and was a <a href="https://www.forbes.com/sites/johnbrinkley/2017/01/24/trump-dumps-trans-pacific-partnership-sad/#4543448e75dc">gift</a> to Chinese influence in Asia. But we are only now beginning to see the longer-term repercussions of President Trump’s decision. </p>
<p>During Trump’s trip, the other 11 signatories of the original trade deal, including Japan, Australia, Canada and Mexico, <a href="http://money.cnn.com/2017/11/13/news/economy/tpp-11-without-us-what-next/index.html">agreed to move forward</a> without the U.S. This is a problem for America because it means that these countries will grant preferential market access to one another, making it harder for American companies to compete in their markets.</p>
<p>American companies are already feeling the impact of what happens when they’re left out of a trade deal. A recent <a href="https://www.nytimes.com/2017/11/12/business/trump-trade-lobster-canada.html">New York Times article</a>, for example, highlights the plight of American lobster producers whose prices are being undercut by Canadian producers in the wake of a new <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">Canada-European Union trade agreement</a>. </p>
<p>If the United States is reluctant to participate in multilateral trade agreements, other countries have every incentive to do deals that exclude and even may hurt the U.S.</p>
<p>Trump’s <a href="https://theconversation.com/trumps-threat-to-withdraw-from-nafta-may-hit-a-hurdle-the-us-constitution-81444">ongoing efforts</a> to renegotiate the North American Free Trade Agreement also pose potential dangers. The administration has a tendency to speak of renegotiation as if it can <a href="http://money.cnn.com/2017/10/11/news/economy/trump-nafta/index.html">dictate the terms</a>. But while Canada and Mexico may be more dependent on the U.S. than the U.S. is on them, an <a href="https://www.cfr.org/backgrounder/naftas-economic-impact">implosion of NAFTA would be devastating</a> for many U.S. industries that rely on North American trade. <a href="https://www.cnbc.com/2017/11/13/the-next-big-worry-for-markets-nafta-fails-and-trade-wars-erupt.html">Markets increasingly worry</a> that NAFTA may not survive the negotiations. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&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 have been meeting to renegotiate NAFTA.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<p>In addition to withdrawing from and renegotiating trade agreements, the administration has <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">ramped up</a> unilateral efforts to sanction U.S. trading partners for receiving subsidies or for dumping their products on the American market. </p>
<p>Decisions to impose trade penalties risk blowback, as when sanctions on Bombardier drove the Canadian plane manufacturer into the <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">arms of Airbus</a>, Boeing’s top foreign rival. The threatened imposition of sanctions on imports of solar panels may have <a href="https://www.politico.com/story/2017/09/22/solar-tariff-trump-china-trade-243021">a similar effect</a>, damaging American panel installers and encouraging foreign retaliation. </p>
<h2>Trade needs a champion</h2>
<p>President Trump assumes the U.S. can act unilaterally without consequences. </p>
<p>Economic history shows this doesn’t work. The world’s economies are far more interdependent than they were during the Great Depression, so the impact of governments all following a “my country first” trade policy – as the president said <a href="http://www.eaglenews.ph/trump-says-us-wont-tolerate-other-countries-unfair-trade-practices-anymore-to-protect-america-first/">he expected world leaders to do</a> – could have disastrous consequences. </p>
<p>Today, the international trade system America helped create, one based on open markets and classically liberal principles, is <a href="https://www.brookings.edu/research/the-twilight-of-the-liberal-world-order/">under threat</a> as never before. Yet President Trump’s “America first” approach is a total abdication of the traditional U.S. role as its defender. And in fact, the president is doing his best to <a href="https://www.nytimes.com/2017/10/31/business/economy/trump-trade.html?_r=0">undermine that system</a>. </p>
<p>In the final analysis, the Trump administration is reverting to a policy that is dangerous for the U.S. economy and for the international system. </p>
<p>If the U.S. abdicates, China may be the only country that can take the reins. The question is, what would that mean for the current system of open and free markets?</p><img src="https://counter.theconversation.com/content/87477/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>American lawmakers in the 1930s learned the hard way what happens when a country raises tariffs and makes other unilateral trade decisions.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.