tag:theconversation.com,2011:/us/topics/rcep-12893/articlesRCEP – 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>
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<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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<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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<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/1649472021-07-26T19:55:07Z2021-07-26T19:55:07ZHow a new trade deal could make it harder to improve life for Australians in aged care<figure><img src="https://images.theconversation.com/files/413047/original/file-20210726-23-1ceex3n.jpg?ixlib=rb-1.1.0&rect=1706%2C268%2C2150%2C1537&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Morrison and Trade Minister Birmingham sign the Regional Comprehensive Economic Partnership agreement in November 2020, Canberra.</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>The Regional Comprehensive Economic Partnership agreement signed in November 2020 between Australia and 14 nations including Singapore, Japan and China could make it harder to tighten the regulations relating to aged care.</p>
<p>This isn’t because of any special provisions the agreement contains, but because of a special provision that is missing.</p>
<p>As is <a href="https://theconversation.com/last-to-know-the-eu-knows-more-about-our-trade-talks-than-we-do-144196">common</a> with trade and investment deals signed by the Australian government, the text was only made public <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/RCEP/Treaty_being_considered">after it was signed</a>.</p>
<p>It will not have legal force until the parliament passes implementing legislation after a recommendation from the parliament’s Joint Standing Committee on Treaties, which will hold public hearings on Tuesday, Wednesday and Friday.</p>
<p>The <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/RCEP/Treaty_being_considered">Regulatory Impact Statement</a> presented to the inquiry by the Department of Foreign Affairs and Trade says the chapter on trade in services contains provisions that would “lock-in” existing regulation and require signatories to “not adversely modify existing regulation in particular services sectors”.</p>
<p>The provisions apply to all services other than those specifically exempted.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/weve-just-signed-the-worlds-biggest-trade-deal-but-what-is-the-rcep-150082">We've just signed the world's biggest trade deal, but what is the RCEP?</a>
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<p>Australia included in an <a href="https://www.dfat.gov.au/sites/default/files/rcep-annex-iii-schedule-of-australia.pdf">annex</a> to the agreement a list of services that are specifically exempted, being “the specific sectors and sub sectors or activities for which Australia may maintain existing, or adopt new or more restrictive, measures”.</p>
<p>The list includes income security or insurance, social security or insurance, social welfare, public education, public training, health, childcare, public utilities, public transport and public housing. It does not include aged care.</p>
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<a href="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413064/original/file-20210726-21-r6q27n.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The omission is puzzling, since childcare is included.</p>
<p>The footnotes add “for greater certainty” that the measures listed include
the protection of personal information relating to health and children, and add “for the avoidance of doubt”, that they include measures relating to the collection of blood and subsidies under Medicare and the Pharmaceutical Benefits Scheme.</p>
<p>There are no footnotes for the avoidance of doubt about aged care.</p>
<h2>Protection for aged care not ensured</h2>
<p>It might be that the government believes its ability to regulate for improved aged care standards is protected by the exemptions for “health services” and “welfare services”. </p>
<p>But United Nations classifications used in trade agreements code aged care differently from health care and social welfare services.</p>
<p>If the government really does intend to protect its ability to legislate for improved aged care standards, it would be well advised to add in a specific exemption for aged care, for the avoidance of doubt.</p>
<h2>The royal commission wants tougher protection</h2>
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<a href="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413083/original/file-20210726-15-1otrh2u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The <a href="https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-executive-summary.pdf">Royal Commission into Aged Care Quality and Safety</a> exposed multiple scandals caused by a lack of qualified staff and poor quality care, and recommended increases in staffing levels, increases in qualifications of staff and changes to licensing arrangements. </p>
<p>These are the types of tighter regulations the agreement could prevent, unless aged care is specifically exempted.</p>
<p>The Regional Comprehensive Economic Partnership will bind Australia, New Zealand, China, Japan, South Korea, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.</p>
<p>Companies considering investing in industries in those countries that aren’t specifically exempted (as aged care appears not to be in Australia) will be given an <a href="https://www.dfat.gov.au/sites/default/files/rcep-chapter-8.pdf">assurance</a> that state and federal governments won’t tighten rules relating to </p>
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<p>the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test</p>
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<p>As well, measures relating to qualification and licensing requirements must be “not more burdensome than necessary to ensure the quality of the service”.</p>
<p>The omission of a specific exemption for aged care might be an oversight.</p>
<h2>Australia could be placing itself at risk</h2>
<p>When negotiations for the Regional Comprehensive Economic Partnership began in 2012, the aged care industry was dominated by local not-for-profits. </p>
<p>The sector is now dominated by <a href="https://cictar.org/wp-content/uploads/2018/09/TJN_For-Profit_Aged_Care_Report.pdf">for-profit providers</a>, with a jointly-owned Singapore company, Opal, one of the largest. </p>
<p>Singapore is a party to the RCEP, giving it the right to initiate a state-to-state dispute before an international tribunal if it believes Australia has violated the agreement. </p>
<p>If the tribunal found in Singapore’s favour it could ban or tax Australian products. It is a possibility there might be time to avoid.</p><img src="https://counter.theconversation.com/content/164947/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patricia Ranald is an honorary research associate at the University of Sydney and the convener of the Australian Fair Trade and Investment Network</span></em></p>The Regional Comprehensive Economic Partnership agreement prevents signatories from tightening regulations, except in specified sectors — and aged care hasn’t been named as one of those exceptions.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1499662020-12-15T02:37:59Z2020-12-15T02:37:59ZAs China’s trade war with Australia shows, New Zealand must be careful to balance its own economic priorities<figure><img src="https://images.theconversation.com/files/374956/original/file-20201214-17-1oqmig7.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5194%2C2928&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>New Zealand and China are being <a href="https://unctad.org/system/files/official-document/diaeiainf2020d5_en_0.pdf">pushed toward</a> further regional economic integration as part of the Regional Comprehensive Economic Partnership (<a href="https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/regional-comprehensive-economic-partnership-rcep/rcep-overview">RCEP</a>) signed last month.</p>
<p>On the face of it, the RCEP is a positive step for cross-border investments. It further integrates trade between the two nations, along with Japan, South Korea, Australia and the ten countries in the Association of Southeast Asian Nations (ASEAN).</p>
<p>But perhaps we should stop to ask whether the haste with which this is happening will generate equitable and sustainable benefits.</p>
<p>One of the main criticisms of globalisation is that, in an aggressive and politically driven push for economic integration, the institutional (legal, political) differences between trading and investment partner countries have been overlooked.</p>
<p>The US-China trade war in the past three years, and now COVID-19, have <a href="https://www.scmp.com/comment/opinion/article/3107066/what-lessons-does-chinas-fast-economic-recovery-covid-19-hold-us">highlighted the differences</a> in responses to trade, investment and the pandemic by countries with very different political and economic ideologies. </p>
<p>In particular, China is using its global power to expand its influence and <a href="https://www.nytimes.com/2020/11/23/world/asia/china-xi-jinping-globalization.html">reset the rules</a> of trade relationships. New Zealand must be cautious about its exposure to Chinese influence at this level.</p>
<h2>Rebalancing the books</h2>
<p>Our analysis of foreign direct investment (FDI) application data from the New Zealand Overseas Investment Office from the beginning of 2017 to the end of 2019 shows two conflicting trends.</p>
<p>In financial and insurance services, and the information, communications and technology sectors, application approvals favoured the US and Australia. But in manufacturing, even after the US–China trade war broke out, approvals favoured China.</p>
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Read more:
<a href="https://theconversation.com/an-all-out-trade-war-with-china-would-cost-australia-6-of-gdp-151070">An all-out trade war with China would cost Australia 6% of GDP</a>
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<p>This greater receptiveness to Chinese investments in manufacturing might reflect the push for more economic integration with China in recent years.</p>
<p>But this approach needs to be scrutinised in light of the current stand-off between China and Australia.</p>
<h2>The downside of economic integration</h2>
<p>The recent <a href="https://www.scmp.com/news/asia/australasia/article/3081020/australia-wants-international-probe-coronavirus-origins">call by Australia</a> (supported by New Zealand, the EU and Canada) for an independent investigation into the origin of COVID-19 shows how much deeper institutional differences matter.</p>
<p>China <a href="https://www.smh.com.au/world/asia/if-you-make-china-the-enemy-china-will-be-the-enemy-beijing-s-fresh-threat-to-australia-20201118-p56fqs.html">imposed tariffs and other trade restrictions</a> on Australian beef, barley, minerals, wine and most recently <a href="https://www.theguardian.com/australia-news/2020/dec/14/china-formalises-cut-to-australias-coal-imports-state-media-reports">coal</a> in response to that call and to Australian government criticism of Beijing’s suppression of political dissent in Hong Kong.</p>
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Read more:
<a href="https://theconversation.com/nz-remains-unscathed-by-us-china-trade-war-but-thats-no-reason-for-complacency-125710">NZ remains unscathed by US-China trade war, but that's no reason for complacency</a>
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<p>In an ideal world, the free trade agreement between Australia and China and the much-hyped regional economic integration represented by the RCEP might have salvaged the relationship and allowed the parties to talk more openly about their disputes.</p>
<p>But the opposite has happened. The stronger economic relationship and mutual economic dependency have actually made <a href="https://www.bloomberg.com/news/articles/2020-11-03/china-to-halt-key-australian-commodity-imports-as-tensions-mount">China’s retaliation</a> even more painful for Australia. The less powerful party is always hurt more when a relationship goes wrong.</p>
<h2>The lessons for New Zealand</h2>
<p>New Zealand and Australia are not alone in being at something of a crossroads with China. Many countries are confronting the difficulty (impossibility, even) of balancing the pressure to be part of China’s economic orbit and their fundamental institutional differences.</p>
<p>In essence, it is the tension between greater political and economic freedoms, and state intervention and control. The implications for resolving trade disputes and other economic disagreements are profound.</p>
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<a href="https://theconversation.com/beyond-travel-a-trans-tasman-bubble-is-an-opportunity-for-australia-and-nz-to-reduce-dependence-on-china-137062">Beyond travel, a trans-Tasman bubble is an opportunity for Australia and NZ to reduce dependence on China</a>
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<p>For that reason, New Zealand’s FDI policies and application approvals should reflect a preference for countries with similar institutional conventions. While balancing its trade interests is critical for New Zealand, it should not be driven purely by immediate economic benefits.</p>
<p>New Zealand’s FDI policies should reflect its own best long-term interests: continued regional economic integration with Australia, enhanced <a href="https://www.rnz.co.nz/news/political/419218/nz-begins-free-trade-talks-for-comprehensive-deal-with-uk">post-Brexit leverage</a> of the political, historical and cultural links with the UK, and closer economic ties with developing economies (especially Commonwealth countries such as India and Malaysia).</p>
<p>In doing so, New Zealand will reduce the political and economic risks of over-integration with China and avoid the kind of conflicts based on deep institutional differences we are now witnessing.</p><img src="https://counter.theconversation.com/content/149966/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Monica Ren is affiliated with King's College London.</span></em></p><p class="fine-print"><em><span>Hongzhi Gao and Ivy Guo do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The recently signed RCEP trade agreement encourages even closer ties with China, but this puts New Zealand’s long-term interests at risk.Hongzhi Gao, Associate professor, Te Herenga Waka — Victoria University of WellingtonIvy Guo, Research Assistant, Te Herenga Waka — Victoria University of WellingtonMonica Ren, Lecturer/ Assistant Professor, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1500822020-11-16T06:58:23Z2020-11-16T06:58:23ZWe’ve just signed the world’s biggest trade deal, but what is the RCEP?<p>The giant <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep">Regional Comprehensive Economic Partnership</a> between Australia, China, Japan, South Korea, New Zealand and the ten members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Myanmar, The Philippines, Singapore, Thailand and Vietnam) was signed online on Sunday, November 15. </p>
<p>India left negotiations in November 2019, but even so, the deal will cover one third of the world’s population and economy. </p>
<p>Australia and the other governments refused to release the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/rcep-text-and-associated-documents">text</a> until after signing, continuing Australia’s <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">regrettable secrecy about deals it is about to sign</a>.</p>
<p>India left the RCEP because of concerns about its potentially negative impact on local <a href="https://www.globalasia.org/v14no4/feature/a-step-too-far-why-india-opted-out-of-rcep_rajaram-panda">industry development</a>.</p>
<p>Since Australia already has free trade agreements with all of the remaining members, India’s absence significantly diminishes what might have been in it for Australian exporters.</p>
<p>What’s left are some agreements on <a href="https://www.trademinister.gov.au/minister/simon-birmingham/media-release/australia-welcomes-agreement-finalise-regional-trade-dea">common standards</a> and the claimed ability for Australia to talk to China more than it can through its own one-on-one trade agreement.</p>
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Read more:
<a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Suddenly, the world's biggest trade agreement won't allow corporations to sue governments</a>
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<p>The text was completed before the pandemic and has not been revised since. </p>
<p>As it happened, Australia took actions during the pandemic that were technically contrary to the rules embodied in the RCEP in order to boost <a href="https://www.abc.net.au/news/2020-04-19/scott-morrison-government-coronavirus-covid19-manufacturing/12153568">local manufacturing capacity</a> for essential products. </p>
<h2>We’ve already bent the rules</h2>
<p>The prime minister has since announced <a href="https://www.abc.net.au/news/2020-10-01/australia-manufacturing-industry-bolstered-coronavirus-recovery/12721828">longer term local industry support</a> and the <a href="https://www.trademinister.gov.au/minister/simon-birmingham/speech/trading-australia-towards-future">trade minister</a> has said that the challenge for the future is about getting “the balance right”. </p>
<p>But the rules signed up to on Sunday will integrate Australia further into regional production chains and commit Australia to avoid assistance for local industries of the kind that will arguably be needed to <a href="https://www.futurework.org.au/pandemic_shows_australia_needs_domestic_manufacturing">rebuild and strengthen the economy</a>.</p>
<p>Other rules signed up to on Sunday open <a href="https://www.dfat.gov.au/sites/default/files/rcep-chapter-8.pdf">essential services</a> such as health, education, water, energy, telecommunications, finance and digital trade to foreign investors and restrict the ability of governments to regulate them in the public interest. </p>
<p>It remains to be seen whether these rules will give governments the flexibility they will need to get “the balance right”</p>
<p>Oddly for an agreement dealing with standards, there’s nothing in it about forced labour or child labour, and no mention of climate change. </p>
<p>Its members include countries like <a href="https://www.abc.net.au/news/2019-07-15/uyghur-forced-labour-xinjiang-china/11298750?nw=0">China</a> and <a href="https://www.hrw.org/news/2020/08/24/myanmar-rohingya-await-justice-safe-return-3-years">Myanmar</a> in which there is mounting evidence of labour rights and human rights abuses.</p>
<p>But there are also welcome omissions. </p>
<h2>No further rights for foreign investors</h2>
<p>The final text confers no special rights on foreign corporations to sue governments through what are known as <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Investor-State Dispute Settlement</a> clauses common in other agreements, although there is an opportunity for the members to revisit the idea two years after ratification </p>
<p>Nor are there increases in <a href="https://thediplomat.com/2018/11/indonesia-and-rcep-beware-the-public-health-risks/">patent monopolies</a> for medicines of the kind included in the original Trans-Pacific Partnership. These were suspended in the revised <a href="https://www.dfat.gov.au/trade/agreements/in-force/cptpp/Pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a> now ratified by Australia and six other countries. </p>
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Read more:
<a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Suddenly, the world's biggest trade agreement won't allow corporations to sue governments</a>
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<p>The RCEP will be reviewed by a parliamentary committee which, as is usual in these agreements, will be <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">unable to change the text</a>. </p>
<p>The Coalition has a majority on that committee.</p>
<h2>Broader manoeuvring</h2>
<p>Some commentators see the RCEP through the lens of <a href="https://www.washingtonpost.com/business/why-china-is-creating-a-new-asia-pacific-trade-pact/2020/11/12/0d67b996-24bb-11eb-9c4a-0dc6242c4814_story.html">US-China competition.</a>.</p>
<p>Looked at this way, the US has been weakened by the Trump administration’s decision to <a href="https://theconversation.com/if-trump-pulls-america-out-of-the-tpp-the-question-is-what-next-69396">pull out</a> of the original Trans Pacific Partnership.</p>
<p>It is argued that the RCEP is China’s creation, and the incoming Biden administration will need to counter it by re-joining the revised Trans-Pacific Partnership, which excludes China.</p>
<p>But this is a US-centric a view that downplays the leading role of the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep#:%7E:text=RCEP%20negotiations%20were%20launched%20in,India%2C%20Japan%2C%20New%20Zealand%20and">ASEAN countries </a> in creating the RCEP.</p>
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Read more:
<a href="https://theconversation.com/what-a-biden-presidency-means-for-world-trade-and-allies-like-australia-149735">What a Biden presidency means for world trade and allies like Australia</a>
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<p>A Biden administration is unlikely to re-join the Trans Pacific Partnership any time soon. Parts of the Democratic party remain strongly opposed to it. </p>
<p>The US will rejoin genuinely multilateral organisations such as the World Health Organisation and the Paris Climate Agreement.</p>
<p>But Biden’s trade policy is likely to focus on <a href="https://www.nytimes.com/2020/10/28/business/economy/democrats-biden-trade.html">domestic priorities</a> such as the pandemic and climate change, about which the RCEP says nothing.</p><img src="https://counter.theconversation.com/content/150082/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 an honorary Convener of the Australian Fair Trade and Investment Network.</span></em></p>Australia and other governments refused to release the text until after it was signed on Sunday. It’ll do little for Australian trade.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1433062020-07-29T10:20:41Z2020-07-29T10:20:41ZHuawei and TikTok are at the forefront of a new drift to regionalism – many others will follow<figure><img src="https://images.theconversation.com/files/349920/original/file-20200728-21-rui4zg.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">EPA</span></span></figcaption></figure><p>Huawei and TikTok were two of the most successful examples of globalisation. Huawei started as a small private firm in 1987 and <a href="https://foreignpolicy.com/2019/04/03/the-improbable-rise-of-huawei-5g-global-network-china/">has risen</a> in just over 30 years to become a world champion in telecommunications. TikTok has succeeded over a much shorter time period. Having <a href="https://influencermarketinghub.com/tiktok-growth/#:%7E:text=TikTok%20is%20now%20available%20in,300%20million%20in%20June%202018.">only launched</a> in 2016, the video-sharing service <a href="https://www.socialfilms.co.uk/blog/tiktok-uk-statistics#:%7E:text=In%20total%2C%20App%20Store%20and,reach%2010%20million%20by%202021.">is now</a> the fourth most popular app in the world and has achieved 1.9 billion downloads worldwide. </p>
<p>Both of these Chinese companies are now at the mercy of a widening geopolitical divide. The US <a href="https://www.economist.com/briefing/2020/07/16/americas-war-on-huawei-nears-its-endgame">has led</a> an <a href="https://www.bbc.co.uk/news/newsbeat-4704134">increasingly successful</a> campaign to <a href="https://www.caixinglobal.com/2020-07-17/tsmc-cuts-off-computer-chip-sales-to-huawei-under-us-sanctions-101580989.html">eliminate Huawei</a> from the global market over alleged security fears, <a href="https://www.npr.org/2020/07/22/894343562/trump-administration-is-considering-ban-on-tiktok-in-the-u-s">and is</a> threatening <a href="https://www.theverge.com/2020/7/27/21341062/biden-staff-delete-tiktok-personal-work-phones">to ban</a> TikTok too. There <a href="https://www.zdnet.com/article/tech-trade-war-after-huawei-which-chinese-firms-are-next-on-us-enemies-list/">has also</a> been speculation that other Chinese tech companies such as Lenovo, ZTE and Xiaomi could be at risk. Meanwhile, HSBC <a href="https://fortune.com/2020/06/04/hsbc-hong-kong-china-law-peter-wong/">has risked</a> getting caught <a href="https://www.telegraph.co.uk/business/2020/07/23/hsbc-fresh-pressure-claims-checks-hong-kong-clients-pro-democracy/">in the crossfire</a> by expressing support for China’s security crackdown on Hong Kong.</p>
<p>These developments are signs of attempts by the US <a href="https://hbr.org/2020/06/prepare-for-the-u-s-and-china-to-decouple">to decouple</a> from China’s economy and concentrate <a href="https://www.forbes.com/sites/zakdoffman/2020/12/29/us-and-china-technology-conflict-heres-why-2020-is-so-critical/#3f198be3175e">on alliances</a> within its own political and economic sphere. It chimes with the wider drift away from globalisation towards a more regional approach to trade, reflected in the difficulties of the World Trade Organization (WTO) and the rise of regional trading blocs.</p>
<h2>Regional retrenchment</h2>
<p>In response to the US moves to restrict its activities, <a href="https://asiatimes.com/2020/05/south-korea-is-the-pivot-in-the-huawei-wars/">Huawei is now</a> trying to forge closer supply alliances with companies in China and elsewhere in Asia, such as Samsung. TikTok could be making a similar move but in the opposite direction, <a href="https://thenextweb.com/apps/2020/07/22/tiktok-might-be-sold-to-us-investors-to-ward-off-security-concerns/">amid reports</a> that several US investment capitalists might buy the brand from owner ByteDance and separate it from its Chinese version, which is called Douyin. In both cases, these companies appear to be retrenching from a global to a regional focus. </p>
<p>These developments are being driven by the growing antagonism between China and the US – but many other multinationals are facing a similar dilemma, because the global trade system is at risk of breaking down. Multinationals established their dominance by forging global supply chains that maximised the <a href="https://www.econlib.org/library/Topics/Details/comparativeadvantage.html">comparative advantages</a> of each country involved. </p>
<p>They have been encouraged since the 1940s by global trade policies that have struck down national trade barriers and deepened global economic integration. In recent years, this has been done through WTO agreements. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Donald Trump giving a speech." src="https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=735&fit=crop&dpr=1 600w, https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=735&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=735&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=923&fit=crop&dpr=1 754w, https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=923&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/349948/original/file-20200728-27-1ks0j50.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=923&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">Protectionism personified.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/las-vegas-nevada-december-14-2015-353100986">Joseph Sohm</a></span>
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<p>But the wealth created by globalisation <a href="https://publications.parliament.uk/pa/ld200203/ldselect/ldeconaf/5/507.htm">has been</a> very unevenly distributed, which has caused domestic political disturbance in many corners of <a href="https://www.theguardian.com/world/2017/jul/14/globalisation-the-rise-and-fall-of-an-idea-that-swept-the-world">the world</a>. Nationalist governments have <a href="https://www.bankofengland.co.uk/monetary-policy-report/2019/november-2019/in-focus-trade-protectionism-and-the-global-outlook">responded to</a> this new reality with protectionist measures, of which the <a href="https://theconversation.com/winners-and-losers-in-the-us-china-trade-war-119320">US-China trade war</a> is <a href="https://english.bdi.eu/article/news/protectionism-and-nationalism-on-the-rise/">only the most</a> prominent example.</p>
<p>As a result, the trade liberalisation promoted by the WTO has run into difficulty. This was clear from <a href="https://www.nytimes.com/2016/01/01/opinion/global-trade-after-the-failure-of-the-doha-round.html">the breakdown</a> of the Doha Round of negotiations in the mid-2010s due to unsolvable tensions between the member states. The WTO’s system for resolving trade disputes between countries <a href="https://www.piie.com/publications/policy-briefs/dispute-settlement-crisis-world-trade-organization-causes-and-cures#:%7E:text=WTO%20members%20have%20failed%20to,rules%20on%20dispute%20settlement%20itself.&text=For%20the%20past%20few%20years,the%20scope%20for%20judicial%20overreach">has also</a> become dysfunctional, <a href="https://www.bbc.co.uk/news/business-50681431">stemming from a row</a> over how it operates. Regrettably – but not surprisingly – the WTO’s director-general, Roberto Azevedo, <a href="https://www.dw.com/en/wto-chief-roberto-azevedo-resigns-amid-appeals-dispute-with-united-states/:%7E:text=Robert%20Azevedo%20has%20said%20he,of%20the%20World%20Trade%20Organization.&text=World%20Trade%20Organization%20(WTO)%20Director,of%20the%20global%20trade%20body.">announced he was</a> stepping down a few weeks ago – a year before his term was due to end. </p>
<h2>The emerging trading order</h2>
<p>In parallel with the rise in protectionism and the WTO problems, countries have increasingly been building regional trade blocs. Examples include <a href="https://www.cfr.org/backgrounder/nafta-and-usmca-weighing-impact-north-american-trade">the renewed</a> North American Free Trade Agreement (NAFTA), the <a href="https://www.instituteforgovernment.org.uk/explainers/trade-cptpp">Pacific rim’s</a> Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP), and the <a href="https://asean.org/joint-media-statement-10th-regional-inter-sessional-comprehensive-economic-partnership-rcep-ministerial-meeting/">forthcoming China-led</a> Regional Inter-sessional Comprehensive Economic Partnership (RCEP). </p>
<p>These agreements are all about further liberalising trade between member states within a region. They do this by cutting tariffs, reducing administrative burdens by mutually recognising one another’s technical standards, harmonising public procurement rules, establishing similar employment levels and environmental protections, and giving easier market access to services.</p>
<p>These measures significantly reduce companies’ operating costs, particularly if their production lines are spread across the countries in the bloc. Ultimately they make supply chains more regional, making it easier to buy and sell goods and services within the zone. </p>
<p>But just like the US-China conflict has caused difficulties for Huawei and TikTok, this regional approach to free trade creates tensions with the multilateralism of the WTO. Regional trading blocs run against the principle on which the WTO is founded, namely “most favoured nation treatment”. This says that whenever one nation grants a trading concession to another, it should be extended to all other nations in the world.</p>
<p>Whenever regional blocs expand trade within their region, producers outside the bloc who can make the same goods more cheaply end up being discriminated against. Global welfare suffers as a result. For multinationals trying to operate global supply chains and trade around the world, this also represents a spaghetti bowl of red tape. </p>
<p>Yet the fact that we are now going to have rival trade blocs in Asia when RCEP launches at the end of the year suggests that more regionalism could be the shape of things to come. If so, this could further fragment the global trade system. </p>
<p>It is of course possible that more regionalism could stimulate global free trade in the long run. Once the nations within a bloc have become highly economically integrated, it may encourage outsider countries to join in a attempt to take advantages of the bloc. The UK’s <a href="https://www.gov.uk/government/publications/uk-approach-to-joining-the-cptpp-trade-agreement/an-update-on-the-uks-position-on-accession-to-the-comprehensive-and-progressive-agreement-for-trans-pacific-partnership-cptpp">move to</a> participate in the CPTTP could be an early example. If this eventually encouraged multinationals to trade across regional blocs, global trade liberalisation could move back up the agenda. </p>
<p>Equally, the superiority of certain players within certain blocs might make this happen by necessity. For example, Huawei’s dominance in <a href="https://www.forbes.com/sites/danielaraya/2019/04/05/huaweis-5g-dominance-in-the-post-american-world/#4e037b3848f7">5G technologies</a> and its efforts to establish an alliance in Asia and other developing countries raises the possibility that it might one day overtake the US tech giants. If so, it may make western governments think again about whether protectionism was working as intended, and encourage them to re-embrace the system of global trade.</p><img src="https://counter.theconversation.com/content/143306/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zhongdong Niu 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>As world trade breaks down into a patchwork of regional blocs, it raises questions about the future of global multinationals.Zhongdong Niu, Lecturer in Law, Edinburgh Napier UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1253212019-10-20T19:06:10Z2019-10-20T19:06:10ZArrogance destroyed the World Trade Organisation. What replaces it will be even worse<figure><img src="https://images.theconversation.com/files/297760/original/file-20191019-56198-16xy1hv.jpg?ixlib=rb-1.1.0&rect=813%2C34%2C2073%2C1107&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As the public face of globalism, the WTO mobilised protesters. It'll be replaced by the law of the jungle.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fuzheado/73079281">fuzheado/Flikr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>In line with his usual practice, Australia’s Prime Minister Scott Morrison has backed Donald Trump over the World Trade Organisation, criticising of China’s status in it as a “developing country”. </p>
<p>Critics of the intervention have pointed out that being a “developing country” <a href="https://theconversation.com/myth-busted-chinas-status-as-a-developing-country-gives-it-few-benefits-in-the-world-trade-organisation-124602">doesn’t provide China with many benefit</a>, and that Australia would be better off not taking sides. </p>
<p>But the debate, to use the cliché, is like arguing about the deck chairs on the Titanic. </p>
<p>In the absence of a surprising reversal from Trump, the World Trade Organisation will cease to exist as it has been <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">in a matter of weeks</a>. </p>
<p>More likely than not, it will never be revived.</p>
<p>The demise has been a long time coming. </p>
<h2>Higher than heaven…</h2>
<p>The WTO was established to replace the <a href="https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade">General Agreement on Tariffs and Trade</a> at the end of the long <a href="https://www.wto.org/english/thewto_e/minist_e/min98_e/slide_e/ur.htm">Uruguay round</a> of trade talks in 1995. </p>
<p>Its establishment coincided with the peak of market liberal triumphalism, exemplified by such books as Fukuyama’s <a href="https://books.google.com.au/books?id=NdFpQwKfX2IC&printsec=frontcover&dq=The_End_of_History_and_the_Last_Man&hl=en&sa=X&ved=0ahUKEwi2rNfS4anlAhWGbn0KHQgJC7QQ6AEIKDAA#v=onepage&q=The_End_of_History_and_the_Last_Man&f=false">The End of History</a> and Thomas Friedman’s <a href="http://www.thomaslfriedman.com/the-lexus-and-the-olive-tree/">The Lexus and the Olive Tree</a>. </p>
<p>It embraced the hubris of the times. </p>
<p>Its mission, according to one of its director-generals Renato Ruggiero, was “<a href="https://unctad.org/en/pages/PressReleaseArchive.aspx?ReferenceDocId=3607">writing the constitution of a single global economy</a>”.</p>
<p>In that context it felt free to override national governments on any issue that might affect international trade, most notably environmental policies.</p>
<p>Most famously, the WTO overrode US laws that required tuna and shrimp sold in the US (whether by US firms or importers) to follow practices that protected <a href="http://www.globalization101.org/the-tuna-dolphin-case/">dolphins</a> and <a href="http://www.globalization101.org/the-shrimp-turtle-case-in-the-new-wto-context/">turtles</a> in decisions that were eventually reversed.</p>
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Read more:
<a href="https://theconversation.com/myth-busted-chinas-status-as-a-developing-country-gives-it-few-benefits-in-the-world-trade-organisation-124602">Myth busted: China’s status as a developing country gives it few benefits in the World Trade Organisation</a>
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<p>Unsurprisingly, it became a symbol of the way democratic governments were becoming powerless to resist the forces of the global economy. Popular resistance, including <a href="https://en.wikipedia.org/wiki/1999_Seattle_WTO_protests">demonstrations and riots</a>, boiled over at the 1999 WTO conference in Seattle.</p>
<p>Although tight security prevented a recurrence of the “Battle of Seattle” in later years, the WTO never recovered its aura of invincibility.</p>
<h2>…too close to the sun</h2>
<p>The Doha round of negotiations, launched in 2001, broke down over attempts by developed countries to push the so-called “<a href="https://en.wikipedia.org/wiki/Singapore_issues">Singapore issues</a>” that would have extended the free trade agenda to government procurement, investment, and competition. They would have mandated the adoption of free-market policies throughout the world, and so met vigorous resistance. </p>
<p>After limping along for a decade or more, the negotiations petered out in a limited agreement reached at Bali in 2013.</p>
<p>Meanwhile, the United States, which had been the primary promoter of the worldwide rules-based WTO model, shifted its focus to one-on-one agreements unencumbered by rules, such as the <a href="https://theconversation.com/a-decade-on-is-the-australia-us-fta-fit-for-the-21st-century-33016">Australia-US FTA</a>, where it could take advantage of its superior bargaining power.</p>
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Read more:
<a href="https://theconversation.com/a-decade-on-is-the-australia-us-fta-fit-for-the-21st-century-33016">A decade on, is the Australia-US FTA fit for the 21st century?</a>
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<p>In all these agreements, including the Australia-US agreement, the US gave hardly any ground on issues such as agricultural protection, while extracting concessions on intellectual property and special treatment for US investors.</p>
<p>The culmination of the process was going to be the Trans-Pacific Partnership, a 12-nation agreement which had the geopolitical goal of <a href="https://www.geopoliticalmonitor.com/the-tpps-loss-is-chinas-gain/">keeping China out</a> of important trading agreements. </p>
<p>This deal, lauded by Hillary Clinton as the “gold standard” of international agreements, was dumped by Trump. It was resurrected by the remaining parties, but is <a href="https://theconversation.com/theres-no-point-to-australias-push-to-ratify-the-tpp-71796">largely pointless without the participation of the US</a>.</p>
<h2>We’re entering a world with few rules…</h2>
<p>As in other areas of policy, Trump’s tariff wars are often characterised as a radical break with the past, but they can also be seen as a continuation of long-standing trends. </p>
<p>Trump’s attempts to exploit the greater size of the US economy to extract concessions isn’t new. The problem is that his chosen targets, China and the European Union, have been big enough to resist, using the WTO.</p>
<p>His response has been to cripple the WTO by <a href="https://www.reuters.com/article/us-usa-trade-wto-idUSKCN1LC19O">refusing to appoint new judges to its appellate panel</a>. </p>
<p>By December only one judge will be left and the WTO will 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">unable to take on new cases</a>.</p>
<p>To prepare for this likely outcome, the EU has <a href="https://www.politico.eu/article/eu-builds-anti-trump-trade-bazooka/">set up structures</a> that would allow it to retaliate against the US on a far larger scale than WTO rules would allow. </p>
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Read more:
<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">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<p>China is attempting to do the same thing using <a href="https://www.scmp.com/economy/china-economy/article/3021246/china-pushes-rcep-regional-pact-amid-us-trade-war-japan-korea">Regional Comprehensive Economic Partnership</a>), in which Australia – but not the US – would be a member. And it is going beyond trade restrictions, warning Chinese tourists and businesses <a href="https://www.usatoday.com/story/money/2019/06/18/trade-war-china-hits-tourism-us/1477264001/">against travelling to the US</a>. </p>
<p>The recent thaw in the trade war might halt the escalation for a while, but it’s unlikely to reverse it.</p>
<h2>…for which we’ve few plans</h2>
<p>If Trump is re-elected in 2020, the World Trade Organisation will be, for all practical purposes, finished.</p>
<p>The rules will revert to those of the earlier General Agreement on Tariffs and Trade, which give large countries like the US much more scope to do what they want.</p>
<p>Even if Trump is defeated, it is unlikely Humpty Dumpty can be reassembled. Likely Democratic alternatives such as Elizabeth Warren are not free-traders. </p>
<p>And, having rearmed in response to the US, other countries aren’t likely to put down their weapons.</p>
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Read more:
<a href="https://theconversation.com/a-no-deal-brexit-wont-end-the-uncertainty-for-business-123217">A no-deal Brexit won't end the uncertainty for business</a>
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<p>It raises interesting questions for advocates of a “hard Brexit” who are relying on Britain relying on WTO rules. </p>
<p>UK trade minister Liz Truss says she is backing Trump in his campaign to “<a href="https://uk.reuters.com/article/us-wto-britain/uk-will-back-wto-reform-after-brexit-trade-minister-says-idUKKBN1WO1RB">reform</a>” the WTO, but the reform he is talking about will make its universally-applied rules weaker. By the time the UK emerges alone into the world market, it is likely to find there is little to protect it from the trading practices of the US, China and EU, whether they are fair or not.</p>
<p>The same points apply in spades to Australia. In backing Trump against China, our government is a (presumably unwitting) partner in the dismantling of the rules-based order we have previously defended. </p>
<p>It would be nice to imagine that we have plans for what comes next, but there is little to suggest we do.</p><img src="https://counter.theconversation.com/content/125321/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin 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>We are about to go from having rules that overreached to having few rules. The US, China and the EU will be able to act with impunity.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1235822019-09-16T20:38:38Z2019-09-16T20:38:38ZSuddenly, the world’s biggest trade agreement won’t allow corporations to sue governments<figure><img src="https://images.theconversation.com/files/292564/original/file-20190916-19076-1kwqch6.jpg?ixlib=rb-1.1.0&rect=153%2C191%2C1457%2C658&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 16 nations negotiating the Regional Comprehensive Economic Partnership account for almost half the world's population.</span> <span class="attribution"><span class="source">Shutterstock/Datawrapper</span></span></figcaption></figure><p>The Regional Comprehensive Economic Partnership has been <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">touted</a> as the best hope for keeping world trade flowing after the attacks on the World Trade Organisation. </p>
<p>The WTO isn’t dead yet, but in a two-pronged attack, US President Donald Trump has been flouting the spirit if not the letter of its rules by on one hand imposing tariffs on China and other countries, and on the other blocking appointments to its appellate body. The latter means that after December the appellate body will no longer have enough members to <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">hear new cases</a>.</p>
<p>Although nothing like a proper replacement for the WTO (it would have 16 member nations instead of the WTO’s 164) the Regional Comprehensive Economic Partnership (RCEP) is being talked about as a backstop. The 16 RCEP members account for almost half the world’s population; among them China, India, Japan, Indonesia, Malaysia, Vietnam, Australia, and New Zealand.</p>
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Read more:
<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">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<p>The RCEP negotiations have dragged on since 2012, in part because of what had been seen as a near intractable sticking point: so-called investor-state dispute settlement (ISDS) procedures. </p>
<h2>ISDS was one of worst parts of the RCEP</h2>
<p>The World Trade Organisation doesn’t have ISDS. In the WTO, governments can take action against governments under WTO rules but corporations can’t sue governments.</p>
<p>ISDS provisions, present in many one-on-one or regional trade deals, allow foreign corporations (but not local corporations) to take on governments.</p>
<p>When the Philip Morris tobacco company lost its case against the Australian government over plain packaging laws in Australia’s High Court, it was able to have a second go in an international tribunal using the ISDS provisions of an Australia-Hong Kong investment treaty. This right would not have been available to an Australian company.</p>
<p>Although Australia successfully had the case thrown out, it took it seven years and cost A$24 million. Australia recovered only <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million</a> from Philip Morris.</p>
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Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>ISDS provisions were developed in the post-colonial period after World War II to compensate international investors for the direct expropriation or taking of property by governments. But over the past 20 years they expanded to include “indirect” expropriation, “minimum standard of treatment” and “legitimate expectations”, which do not involve taking of physical property and do not exist in many national legal systems.</p>
<p>Because the cases are very costly, they are mostly used by large global companies that already have enormous market power, including tobacco, pharmaceutical, agribusiness, mining and energy companies.</p>
<p>There are now <a href="https://investmentpolicyhub.unctad.org/ISDS">942</a> known ISDS cases, with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_1.pdf#overlay-context=Against_ISDS">health</a> and environment laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a>.</p>
<h2>The tide is turning against it</h2>
<p>Legal experts like former High Court Chief Justice <a href="http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj09jul14.pdf">Robert French</a> have noted they are conducted by temporary tribunals often presided over by <a href="https://www.bilaterals.org/IMG/pdf/isds-the_wild,_wild_west_of_international_law_and_arbitration.pdf">practising advocates</a> who can represent a corporation or government in one case and then sit on a tribunal the next, calling into question their independence. The decisions need not make use of precedents and have no appeals, meaning they need not be consistent. </p>
<p>Both the United States and European Union are moving against ISDS provisions. In January the 28 EU member states decided to <a href="https://ec.europa.eu/info/publications/190117-bilateral-investment-treaties_en">terminate ISDS arrangements between themselves</a>. </p>
<p>The EU is not including ISDS in any of its current negotiations, including those for a EU-Australia free trade agreement.</p>
<p>In the longer term, Europe is pursuing a controversial proposal for a permanent Multilateral Investment Court, which would once again allow foreign investors to sue sovereign governments but would address <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2692122">procedural concerns about temporary tribunals</a>. It hasn’t yet gained support from the US, Japan, Australia or other key players, so is not likely to be implemented soon.</p>
<p>The US and Canada have excluded ISDS from their part of the new North America Free Trade Agreement, known as the <a href="https://www.iisd.org/library/usmca-investors">United States-Mexico-Canada Agreement</a>. </p>
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Read more:
<a href="https://theconversation.com/how-is-new-nafta-different-a-trade-expert-explains-104212">How is new NAFTA different? A trade expert explains</a>
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<p>Two institutions that oversee ISDS cases, the United Nations Commission on International Trade Law and the World Bank International Centre for Settlement of Investment Disputes, are conducting <a href="https://uncitral.un.org/sites/uncitral.un.org/files/wp166.pdf">reviews</a> of the system.</p>
<h2>It looks as if the RCEP will be free of it</h2>
<p>Australia is notoriously tight-lipped about international trade negotiations. But late last week Malaysia’s trade minister <a href="https://themalaysianreserve.com/2019/09/13/rcep-talks-to-proceed-without-isds/">Datuk Darell Leiking</a> revealed that Malaysia and each of the other 15 parties to the RCEP negotiations had agreed to exclude ISDS provisions from the deal.</p>
<p>Malaysia, India, Indonesia and New Zealand are all officially opposed to ISDS provisions, but this is the first public sign that all the RCEP countries have agreed to exclude it.</p>
<p>“Once the agreement is in force, which is within two years, the member states will re-look into it and see whether or not we are going to have the ISDS. But it must be an agreement made by all countries,” he is quoted as saying. “For now, there is no ISDS.” </p>
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Read more:
<a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">The fossil fuel era is coming to an end, but the lawsuits are just beginning</a>
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<p>Opposition to ISDS is growing. The Australian government’s apparent agreement to remove ISDS provisions from the RCEP raises questions about why it is continuing to pursue such provisions in the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Indonesia-AustraliaCEPA">Indonesian</a> and <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/A-HKFTA">Hong Kong</a> trade deals currently being reviewed by the parliament’s joint standing committee on treaties. </p>
<p>It also raises the question of whether Labor, the Greens and the Centre Alliance, each of which has has policies opposing ISDS, will support the agreements when committee reports on them in mid-October.</p>
<h2>But problems remain</h2>
<p>Defeating ISDS in the RCEP will be a victory for social movements and governments concerned to retain public interest regulation. </p>
<p>But other problematic proposals remain on the RCEP agenda. </p>
<p>These include <a href="https://croakey.org/calls-to-end-secrecy-on-trade-negotiations-underway-this-week-amid-public-health-concerns/">longer monopolies for medicines</a> that would delay the the availability of cheaper medicines and would have the worst impacts in developing countries. </p>
<p>It remains to be seen whether this and other sticking points can be resolved and the negotiations completed by their current target date of the end of 2019.</p><img src="https://counter.theconversation.com/content/123582/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is an honorary research fellow at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network</span></em></p>The biggest barrier to Australia and much of the rest of the world signing up to the world’s biggest trading bloc appears to have been removed.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1214252019-08-08T20:07:10Z2019-08-08T20:07:10ZAre Trump’s tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership<p>President Trump’s “America First” agenda is rapidly trashing the global economic system and the rules and norms the US has championed throughout in the post war era. </p>
<p>Mr Trump has been singling out particular countries, including China and Mexico, for punitive tariffs way in excess of those imposed on imports from other countries, a practice that may have some legality in the US but is almost certainly outlawed by the World Trade Organisation.</p>
<p>The latest, <a href="https://twitter.com/realDonaldTrump/status/1156979446877962243">announced on Twitter</a> and due start to September 1, is a tariff of 10% on almost all of the $US300 billion worth of Chinese imports not subject to an earlier punitive tariff of 25%.</p>
<p>Among them are clothes, shoes, blankets and bedding, curtains, lighting fixtures, furnishings, toys and electronic goods including <a href="https://www.businessinsider.com.au/trump-tariffs-could-raise-prices-on-clothes-shoes-phones-list-2019-8">mobile phones, laptops, tablets, and televisions</a>, but only those from China. </p>
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Read more:
<a href="https://theconversation.com/the-china-trump-trade-war-has-spread-to-australia-were-now-at-risk-of-global-currency-war-121486">The China-Trump trade war has spread to Australia. We're now at risk of global currency war</a>
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<p>Until now, the average US tariff rate has been <a href="https://ustr.gov/issue-areas/industry-manufacturing/industrial-tariffs">2%</a>. The new tariffs push the average rate on Chinese imports to more than 20%, close to the infamous <a href="https://www.piie.com/research/piie-charts/trumps-latest-trade-war-escalation-will-push-average-tariffs-china-above-20">Smoot-Hawley tariff levels</a> that stifled global economic growth in the 1930s. </p>
<p>China has already responded with tariffs of its own, and by <a href="https://edition.cnn.com/2019/08/05/economy/china-us-agriculture/index.html">slowing purchases of US agricultural products</a>. </p>
<h2>Are Trump’s actions legal?</h2>
<p>The World Trade Organisation to which most of the world belongs and to which the US has belonged since its inception and China since 2001, has as its most important principle that “<a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm">countries cannot normally discriminate between their trading partners</a>”. </p>
<p>It means that if tariffs are low, as they are in the United States, that low rate has to be applied to imports from all member countries, not to all but one. Exceptions are permitted only “under strict conditions”.</p>
<p>The General Agreement on Tariffs and Trade administered by the WTO offers a <a href="https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art21_e.pdf">tiny out</a> relating to national security, on which Trump appears to be relying. Article XXI states that the agreement</p>
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<p>shall not prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests </p>
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<p>Subsections clarify that a member country can invoke this section (i) relating to fissionable nuclear materials; (ii) relating to the traffic in arms, ammunitions, and implements of war; and (iii) in times of war or other emergency in international relations.</p>
<p>It’s not obvious that that there is any such emergency. Trump is threatening tariffs on automobiles and auto parts from Japan, Germany and elsewhere in the name of national security and it’s difficult to see any justification there, as well. </p>
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Read more:
<a href="https://theconversation.com/vital-signs-blame-trump-not-china-for-the-looming-trade-and-currency-war-121619">Vital Signs. Blame Trump, not China for the looming trade and currency war</a>
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<p>In April this year the WTO dispute settlement panel issued a landmark ruling in a dispute between Russia and the Ukraine asserting that the panel, <a href="https://www.csis.org/analysis/wtos-first-ruling-national-security-what-does-it-mean-united-states">rather than the country imposing tariffs</a>, had the power to determine whether or not there was an emergency.</p>
<p>Worse still for the US (and for Russia) it found that </p>
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<p>political or economic differences between members are not sufficient, of themselves, to constitute an emergency</p>
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<h2>So the US would be found to have broken the rules?</h2>
<p>Breaking the rules and being found to have broken the rules are two different things.</p>
<p>The first step would be for another WTO member to take the United States to the dispute settlement panel and appellate body, incurring the wrath of the US and taking on the small risk of a judgement against it.</p>
<p>The second would be for the appellate body to hear the case.</p>
<p>Normally seven members strong, the WTO appellate body has shrunk to just three people (the minimum permissible) after the US <a href="https://www.nytimes.com/2018/12/17/opinion/trade-war-china-wto.html">blocked every new appointment </a> after each four-year term expired.</p>
<p>Two more members’ terms expire in December, and the last expires in December 2020.</p>
<p>The body will be able to continue work on existing cases for a year or two because members whose terms have expired are allowed to continue work on cases they have started. But after December the appellate body will be <a href="https://www.bloomberg.com/news/articles/2019-07-30/trump-s-bid-to-dismantle-global-trading-system-poised-for-a-win">unable to take on new cases</a>.</p>
<h2>The rules themselves are under threat</h2>
<p>The era of a rules-based trade is ending. The US has gone from underwriting the rules for the past 70 years to becoming their <a href="https://www.eastasiaforum.org/2019/08/04/rcep-vital-to-defend-global-trade-order/">biggest threat</a>.</p>
<p>The European Union and Canada are trying to get around the destruction of the body that enforces the rules by setting up their own dispute settlement system based on the existing WTO rules and will use <a href="https://www.ft.com/content/3405416c-af97-11e9-8030-530adfa879c2">retired appellate body judges</a>. Other nations might join in.</p>
<p>The United States and China — the world’s two largest economies — are engaged in a trade war that appears to be spiraling out of control, doing immense damage to the economies of each, and to worldwide GDP. </p>
<p>A worst-case outcome is an all-out global trade war that would undoubtedly lead to global recession. That did not seem a plausible scenario two years ago, but <a href="http://asiapacific.anu.edu.au/news-events/all-stories/building-coalition-openness-asia">it is now</a>.</p>
<h2>Australia and Japan should help China fight back</h2>
<p>As the world’s largest trader and second-largest economy, China has most to lose from a breakdown in the multilateral trading system, and the most to gain by working with countries such as Japan and Australia to maintain discrimination-free trade.</p>
<p>The most promising opportunity in Asia is with the Regional Comprehensive Economic Partnership (RCEP) — an agreement presently being negotiated by the 10 members of the Association of Southeast Asian Nations, as well as Australia, China, India, Japan, New Zealand and South Korea.</p>
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Read more:
<a href="https://theconversation.com/china-capitalises-on-trumps-hostility-to-trade-with-a-new-deal-for-asia-pacific-68685">China capitalises on Trump's hostility to trade with a new deal for Asia-Pacific</a>
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<p>RCEP provides an opportunity to build an Asian coalition in defence of free trade and economic cooperation. The group includes some of the largest and most dynamic economies in the world and is important enough to make a difference globally. </p>
<p>Australia’s Productivity Commission estimates that even if tariffs were raised by 15% globally (as happened in the great depression), <a href="https://www.pc.gov.au/research/completed/rising-protectionism">RCEP countries could continue their economic expansion</a> if they abolished tariffs as a group. </p>
<p>Australia has long championed multilateral or global rules-based trade. It is time to recognise those rules are being torn down and work with others to protect the what we have.</p>
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Read more:
<a href="https://theconversation.com/the-us-china-trade-war-5-essential-reads-121476">The US-China trade war: 5 essential reads</a>
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<img src="https://counter.theconversation.com/content/121425/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shiro Armstrong receives funding from the Australian government, Japanese government and the Economic Research Institute for ASEAN and East Asia in Jakarta. </span></em></p>Illegality doesn’t matter when you’ve kneecapped the umpire who would have enforced the rules.Shiro Armstrong, Director, East Asian Bureau of Economic Research, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/901732018-01-17T18:44:34Z2018-01-17T18:44:34ZIn the economic power struggle for Asia, Trump and Xi Jinping are switching policies<p>Donald Trump is flexing the United States’ economic muscle in East Asia by introducing a web of new-generation bilateral trade deals to contain China’s challenge. But Beijing is fighting back by political means.</p>
<p>A closer look at the US <a href="https://ustr.gov/sites/default/files/files/reports/2017/AnnualReport/Chapter%20I%20-%20The%20President%27s%20Trade%20Policy%20Agenda.pdf">president’s 2017 trade policy agenda</a> and its <a href="https://ustr.gov/about-us/policy-offices/press-office/reports-and-publications/2017/2017-national-trade-estimate">ensuing initiatives</a> reveals a pattern. <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/march/president-obama%E2%80%99s-2016-trade-policy">Obama’s trade policy</a> favoured multilateral, comprehensive and ultra-regional deals such as the failed Trans-Pacific Partnership (TPP) agreement, and the <a href="https://www2.monash.edu/impact/articles/is-the-tisa-trade-deal-shaky-australia-watches-eu-and-us-for-signs/">frozen Trade in Services Agreement (TiSA)</a>. Whereas Trump pushes for bilateral and more targeted deals. </p>
<p>Obama used trade deals, such as <a href="https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta">one with South Korea</a>, to confront China on the regional status quo. But Trump is reshuffling the cards.</p>
<p>Under Trump, the US Trade Representative (USTR) office prioritises the <a href="http://www.atimes.com/trumps-legal-options-sparking-us-china-trade-war/">strict enforcement of US trade laws</a> to counter foreign government subsidies - even if that means undermining the World Trade Organisation and risking trade retaliations. </p>
<h2>Trump’s deals in Asia</h2>
<p>Beside the deal with Australia, the US has only two bilateral <a href="https://ustr.gov/trade-agreements/free-trade-agreements">free trade agreements (FTA) in force</a> with Asian countries, namely South Korea and Singapore. In comparison, <a href="http://fta.mofcom.gov.cn/english/index.shtml">China has nine FTAs</a> in force in Asia, another four under negotiation, and five more under consideration. </p>
<p>The US boasts it has more than ten <a href="https://ustr.gov/trade-agreements/trade-investment-framework-agreements">Trade and Investment Framework Agreements (TIFAs)</a> with Asian economies. Essentially, these agreements may form the basis for future FTAs or <a href="https://ustr.gov/trade-agreements/bilateral-investment-treaties">Bilateral Investment Treaties</a>. </p>
<p>This isn’t a <a href="http://www.atimes.com/tpp-11-delusions-harm-liberal-economic-order-asia/">trade policy U-turn in Asia</a> but actually a <a href="https://www.whitehouse.gov/the-press-office/2017/08/21/remarks-president-trump-strategy-afghanistan-and-south-asia">strategic convergence between security and trade</a>.</p>
<p>Previous US administrations have often sacrificed domestic industrial manufacturing to prop up international trade, using it as a bargaining tool to exert security influence over geopolitical partners and rivals. Before Trump, the US openly accepted trade deficits and the rorting of international trade laws as the price paid for advancing its defence policy agenda globally.</p>
<p>Imagine it as a strategic pyramid, with defence on top, trade in the middle and industry at the bottom.</p>
<p>Now with Trump we have a strategic triangle. Industry is the top point, with trade and defence interlinked, on the same level, at the bottom. This evolution is nowhere clearer than <a href="http://www.atimes.com/tpp-11-delusions-harm-liberal-economic-order-asia/">in the Asia Pacific region</a>. </p>
<h2>Curbing China’s power</h2>
<p><a href="https://books.google.com.au/books?id=HRZBDwAAQBAJ">China’s goal is to use</a> the <a href="https://theconversation.com/au/topics/rcep-12893">Regional Comprehensive Economic Partnership (RCEP)</a> negotiations to accelerate its major Asian infrastructure projects. The most notable of these is the <a href="https://theconversation.com/au/topics/obor-32561">Belt and Road Initiative</a> and the Asian Infrastructure Investment Bank. This initiative promises to compete with the Western-centric World Bank and Japan-led Asian Development Bank.</p>
<p>It’s not an arms race, but infrastructure projects, investments and even <a href="http://abcnews.go.com/International/wireStory/china-protests-australia-criticism-chinese-aid-pacific-52270684">humanitarian aid</a> are fuelling Xi’s “<a href="https://www.hoover.org/research/xi-jinpings-address-central-conference-work-relating-foreign-affairs-assessing-and">major-power diplomacy with Chinese characteristics</a>”. This means clusters of Asian countries are becoming more and more embedded in China’s economic and strategic policy.</p>
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<a href="https://theconversation.com/trumps-america-first-trade-policy-ignores-key-lesson-from-great-depression-87477">Trump's 'America first' trade policy ignores key lesson from Great Depression</a>
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<p>Strangely, Trump’s strategic triangle is making US policy look like China’s, after it opened to the global economy in the 1980s. Conversely, Xi Jinping’s more assertive regional politics is moving China where the US was before Trump - with defence on top of trade and industry. </p>
<p>The US’ bilateral trade moves are also targeting new commercial routes. The <a href="http://www.thehindubusinessline.com/economy/policy/us-mulling-free-trade-agreement-with-india/article10026929.ece">US is looking at a free trade agreement with India</a>. This would be a great win for the US, as it would further push India away from the China-led RCEP deal. </p>
<p>Indeed, after a promising start, the RCEP negotiations have stalled mainly because of <a href="https://www.bangkokpost.com/business/news/1392206/indian-resistance-could-spell-trouble-for-rcep">India’s resistance</a> to eliminating tariffs on imported goods from China. <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/trade-deficit-with-china-a-matter-of-concern-nirmala-sitharaman/articleshow/59735997.cms">India’s trade deficit with China</a> is on the rise and already exceeds US$50 billion. </p>
<p>A balanced US-India FTA would be a win-win solution for both countries in their quest to muscle out China commercially and politically, especially if it precluded finalising the RCEP.</p>
<p>Adding to this is a recent <a href="https://ustr.gov/sites/default/files/301/2017%20Special%20301%20Report%20FINAL.PDF">US trade report</a> which urged allied economies to coordinate an anti-dumping action on China’s industries. This is designed to protect trade secrets and <a href="http://www.atimes.com/technology-transfers-trenches-us-china-trade-war/">intellectual property rights</a>.
The report pointed out that China systematically: </p>
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<p>…imposes requirements that US firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market.</p>
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<p>In exchange for all of this, the US offers maritime security for a close range of key partners such as Australia, Japan, Singapore, South Korea and Taiwan. This explains why the US administration is <a href="http://www.atimes.com/article/us-woos-india-100-year-alliance-china/">wooing India</a> to join Japan and Australia in a revived trade-security alliance against China, the so called <a href="https://www.reuters.com/article/us-usa-asia-quad/u-s-seeks-meeting-soon-to-revive-asia-pacific-quad-security-forum-idUSKBN1CW2O1">Quadrilateral Security Forum</a>. </p>
<p>This recent Trump policy is a remake of <a href="http://www.tandfonline.com/doi/abs/10.1080/01402390.2015.1018412?src=recsys&journalCode=fjss20">Nicholas J Spykman’s “Rimland Theory”</a> that framed the US understanding of Eurasian power politics during the Cold War years. Spykman memorably wrote:</p>
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<p>Who controls the rimland rules Eurasia; who rules Eurasia controls the destinies of the world.</p>
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<p>For one thing, Trump’s restoration of bilateral trade shows a clear direction for the US strategy in Asia. Beyond that, the convergence of trade and security policies has the potential to effectively reshape the US as an indispensable Asian power.</p><img src="https://counter.theconversation.com/content/90173/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA).</span></em></p>Trump is trying to shape the US as a power in Asia and block China in the process, using techniques familiar to Beijing.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/846862017-09-27T07:19:02Z2017-09-27T07:19:02ZWhy Australia doesn’t face sovereign risk in the gas markets<p><a href="https://www.aemo.com.au/-/media/Files/Gas/National_Planning_and_Forecasting/GSOO/2017/2017-Gas-Statement-of-Opportunities---Update.pdf">Shortages</a> of gas <a href="https://www.accc.gov.au/system/files/ACCC%20gas%20inquiry%20first%20interim%20report%20%20September%202017%20-%20FINAL.PDF">in the Australian market</a> have led to <a href="https://twitter.com/billshortenmp/status/912158228187721728">calls</a> for the government to impose restrictions on gas exports. Energy industry executives <a href="http://www.theage.com.au/federal-politics/political-news/gas-crisis-three-times-bigger-than-thought-turnbull-says-20170925-gyo418.html">have responded</a> by saying that market interventions would create a “sovereign risk”, deterring foreign investors and buyers of Australian gas. </p>
<p>But this doesn’t apply to Australia for a number of geographic and geopolitical reasons. We’re on the doorstep of some of the largest gas importers in the world – and <a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-4932.12368/abstract">gas is very costly to ship</a>. Qatar, one of our major competitors, is <a href="http://www.bbc.com/news/world-middle-east-40173757">mired in a diplomatic standoff</a> with its neighbours, and Russian <a href="https://www.reuters.com/article/us-russia-china-energy/russia-china-talks-over-new-gas-routes-stalled-sources-idUSKBN18Y1TX">gas negotiations with China</a> have broken down.</p>
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<a href="https://theconversation.com/big-gas-shortage-looming-but-government-stays-hand-on-export-controls-84610">Big gas shortage looming, but government stays hand on export controls</a>
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<p>To cap it off, Australia is negotiating a <a href="http://dfat.gov.au/trade/agreements/rcep/Pages/regional-comprehensive-economic-partnership.aspx">mega free trade agreement</a> with Japan, China and South Korea (all major gas importers), among others. This makes it unlikely the federal government will do anything to upset the status quo.</p>
<h2>What is sovereign risk?</h2>
<p>When governments <a href="https://theconversation.com/what-is-and-isnt-a-sovereign-risk-30612">default on debt</a> or confiscate private assets this creates concerns among foreign investors that their interests could also be affected by authorities. This is the heart of sovereign risk. It leads investors to charge higher interest rates to make the risk worth it, or forgo investment all together. </p>
<p><a href="https://www.imf.org/en/Publications/WP/Issues/2016/12/31/How-Important-Is-Sovereign-Risk-in-Determining-Corporate-Default-Premia-The-Case-of-South-18634">Research</a> shows that these higher interest rates (called a “risk premium”) can destabilise financial markets and put pressure on local companies.</p>
<p>Textbook examples of actions that created sovereign risk are <a href="http://www.historytoday.com/richard-cavendish/iranian-oil-fields-are-nationalised">the 1951 nationalisation of Iranian oil fields</a>, Argentina’s then president, Cristina Kirchner, <a href="http://www.nytimes.com/2012/04/17/business/global/argentine-president-to-nationalize-oil-company.html">nationalising the country’s largest oil producer</a> in 2012 and Venezuela <a href="https://www.reuters.com/article/us-gm-venezuela/general-motors-says-venezuela-illegally-seizes-auto-plant-idUSKBN17M08I">seizing a General Motors auto plant</a> this year. </p>
<p>However, recently <a href="http://www.theaustralian.com.au/business/companies/companies-approach-to-sovereign-risk-mistaken-john-fast/news-story/c058b1fdad6a53c02ba112ce37611666?nk=5d6ad9d220342e485ab6e1f16946cac5-1506482025">multinational companies have stretched the term sovereign risk</a> to include other government activities that have negative consequences for business profits. This could include tax increases and crackdowns, new regulations, or the removal of subsidies. </p>
<p>Under this broader definition, government interfering in the Australian gas market could be classified as a sovereign risk. However, to be realistic, nothing short of outright nationalisation of natural gas resources or retroactive price fixing would enable energy companies to successfully pursue legal remedies against the Australian government.</p>
<h2>Australia is very competitive in the gas markets</h2>
<p>In purely commercial terms, the Australian gas sector is more competitive than overseas competitors. </p>
<p><a href="http://www.total.com/en/infographics/global-gas-market-key-figures">Industry data</a> show that Asia is the largest market for LNG, importing 245 billion cubic metres of natural gas a year. Much of this goes to Australia’s closest trading partners – China, Japan and South Korea. Only 40 billion cubic metres of this comes through pipelines, mainly through Central Asia.</p>
<p>In 2015-16, <a href="https://www.appea.com.au/oil-gas-explained/benefits/benefits-of-lng/export-revenue/">Australia exported 37 million tonnes of LNG</a> with a value of A$16.55 billion. Foreign buyers are unlikely to easily switch supplier, because of the <a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-4932.12368/abstract">cost</a> of sourcing gas from the Middle East and declining production in several Asian nations. The Department of Foreign Affairs and Trade <a href="https://dfat.gov.au/about-us/publications/Documents/australias-lng-exports-2003-04-to-2013-14.pdf">projects</a> that about 90% of Australian LNG exports by volume will go to Japan, China and South Korea by 2018-19. </p>
<p>On top of the geographic advantages, buyers also have geopolitical reasons to stick with Australia. In particular, the Qatari government is promoting <a href="http://oilprice.com/Energy/Natural-Gas/Can-Qatar-Really-Diversify-Away-From-Natural-Gas.html">a diversification program</a> that will reduce exports. This is mainly due to a <a href="http://www.bbc.com/news/world-middle-east-40173757">diplomatic crisis</a> with its neighbours. </p>
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Read more:
<a href="https://theconversation.com/to-avoid-crisis-the-gas-market-needs-a-steady-steer-not-an-emergency-swerve-84701">To avoid crisis, the gas market needs a steady steer, not an emergency swerve</a>
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<p>Australia is negotiating the Regional Comprehensive Economic Partnership (RCEP), a <a href="http://dfat.gov.au/trade/agreements/rcep/Pages/regional-comprehensive-economic-partnership.aspx">mega free trade agreement</a> between ASEAN and Japan, China, South Korea, India and New Zealand.</p>
<p>RCEP will lower trade barriers and improve market access for Australian exporters of goods and services, and for Australian investors. The three top natural gas net importers in Asia are participating in RCEP negotiations. Participating countries account for almost 60% of Australia’s two-way trade, 18% of two-way investment, and over 65% of Australia’s goods and services exports.</p>
<p>These numbers explain why Prime Minister Malcolm Turnbull is taking a very cautious approach to the domestic gas shortfall. Simply put, the foreshadowed export control mechanisms won’t happen because of Australia’s international trade and investment strategy and existing commercial commitments.</p>
<p><a href="https://theconversation.com/three-charts-on-g20-countries-stealth-trade-protectionism-80678">Stealth trade protectionism</a> may bring short-term relief and quick electoral gratification. However, the quarantining of Australian gas supply is not realistic in the face of so many variables in the global market. </p>
<p>As a <a href="https://www.accc.gov.au/system/files/ACCC%20gas%20inquiry%20first%20interim%20report%20%20September%202017%20-%20FINAL.PDF">recent ACCC inquiry</a> shows, the serious way forward to rein in the gas crisis appears to be more careful co-ordination of interstate domestic demand with LNG sales on international markets. A more sophisticated approach to market co-ordination and regulatory harmonisation at home and abroad promises a more balanced, long-term solution. In the meantime, consumers in eastern Australia will have to brace for steep increases in energy prices.</p><img src="https://counter.theconversation.com/content/84686/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA). </span></em></p>Australia’s prime location and Asia’s growing demand make it unlikely that there will be less foreign demand for our gas.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/781052017-05-29T06:39:34Z2017-05-29T06:39:34ZTrans Pacific Partnership to forge ahead without the US – at least for now<p>Free trade used to be a rallying cry for mainstream North American politicians. Back in the 1980s, Canada’s then prime minister, Brian Mulroney, campaigned successfully on the idea that <a href="https://books.google.com.hk/books?id=0Ol3Otvbuw0C&pg=PA413&lpg=PA413&dq=Brian+Mulroney,+%E2%80%9Cjobs,+jobs,+jobs%22&source=bl&ots=ZYi1_XjTbC&sig=2vKgUegwm2sm7JMpjKSvuc4ioS0&hl=en&sa=X&ved=0ahUKEwiD_JfE14XUAhWLpo8KHU5zDS8Q6AEINDAD#v=onepage&q=Brian%20Mulroney%2C%20%E2%80%9Cjobs%2C%20jobs%2C%20jobs%22&f=false">trade agreements</a> would <a href="https://www.socialism.com/drupal-6.8/articles/dateline-canada-proof-positive-nafta-kills-jobs">create</a> “<a href="http://www.cbc.ca/archives/entry/brian-mulroney-campaigning-for-a-parliamentary-seat-in-central-nova">jobs, jobs, jobs</a>”. </p>
<p>Today, such a slogan could well be political suicide. Indeed, during last year’s US presidential campaign, the only common ground among <a href="https://berniesanders.com/press-release/sanders-the-only-candidate-who-fought-job-killing-trade-deals/">Bernie Sanders</a>, <a href="https://www.theatlantic.com/politics/archive/2015/10/hillary-clinton-abandons-obama-on-trade/409546/">Hillary Clinton</a> and <a href="https://www.theatlantic.com/business/archive/2016/11/tpps-death-wont-help-the-american-middle-class/507683/">Donald Trump</a> was their contempt for the “<a href="https://berniesanders.com/candidates-must-take-a-firm-stand-on-the-job-killing-tpp-deal/">job killing</a>” Trans-Pacific Partnership (TPP) trade deal among American and Asian countries.</p>
<p>And within a few days of reaching office, President Trump <a href="http://www.businessinsider.com/sanders-mccain-trump-trans-pacific-partnership-2017-1">pulled the US out of the agreement</a>. But it now seems that news of the deal’s demise was premature. </p>
<p>At least for now, the 11 other countries party to the agreement – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – are <a href="http://www.bbc.com/news/39990686?ocid=global_bbccom_email_21052017_business">forging ahead</a>, even without the participation of the world’s largest economy.</p>
<h2>Understanding free trade</h2>
<p>Often lost in the fiery rhetoric about free trade agreements, such as the TPP, is their true economic benefit. Trade deals aren’t meant to be about jobs in this or that industry. They’re about raising a country’s overall productivity and prosperity.</p>
<p>In the short term, tariffs may seem beneficial as they allow less efficient homegrown companies to hire more and produce more. And, with free trade, <a href="http://www.imf.org/external/pubs/ft/fandd/basics/trade.htm">foreign competition dislodges local suppliers</a> and <a href="https://www.stlouisfed.org/on-the-economy/2015/june/how-international-trade-affects-the-us-labor-market">employment in certain industries falls</a>.</p>
<p>But what’s overlooked in these simple scenarios is the longer-term price of protectionism. While tariffs prop up some businesses, they <a href="http://www.jstor.org/stable/2006548?seq=1#page_scan_tab_contents">limit the international flow of resources</a> to most others.</p>
<p>Free trade, on the other hand, <a href="http://onlinelibrary.wiley.com/doi/10.1111/1468-0262.00467/full">bolsters productivity</a>. Once countries enter an agreement, resources naturally move around to the more efficient industries at home and abroad. </p>
<p>All countries tend to benefit from this shared increase in productivity – and, yes, from job creation in the long run.</p>
<p>Equally important, productivity usually rises for all countries in <a href="https://academic.oup.com/restud/article/75/1/295/1629450/Market-Size-Trade-and-Productivity">direct proportion to the size of the common market</a>. The larger the scope of the trade agreement and the more countries involved, <a href="https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp091906a">the better for everyone</a>. The reason is simple: an exporting industry now has access to many more markets, with the associated economies of scale reducing costs and increasing profits.</p>
<p>Without the US in the TPP, scale effects will certainly be much smaller. But the productivity effects of new markets remain attractive. Unless, that is, the US exit prompts TPP members to consider that agreement redundant because of the <a href="http://nationalinterest.org/feature/tpp-vs-rcep-america-china-battle-control-pacific-trade-14021">Regional Comprehensive Economic Partnership</a> (RCEP). </p>
<p>This partnership was first conceived as a regional trade agreement to enhance economic ties <a href="http://www.reuters.com/article/us-trade-tpp-rcep-idUSKCN0S500220151011">between the ten members of the Association of Southeast Asian Nations</a> (ASEAN): Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia. It then expanded to include China, Japan, South Korea, India, Australia and New Zealand. And <a href="https://www.pressreader.com/china/global-times/20161123/281487865946077">China has strongly backed the RCEP</a> since the TPP was announced.</p>
<p>Over time, the agreement’s design evolved to <a href="http://www.reuters.com/article/us-trade-tpp-rcep-idUSKCN0S500220151011">become an alternative</a> to the TPP, serving as a proxy for a political battle between the US and China. No more.</p>
<h2>Winners and losers</h2>
<p>Most TPP signatories are already part of the RCEP. That agreement comprises 16 countries and the TPP now has 11. Canada, Chile, Mexico and Peru belong to the TPP but not the RCEP. China, India and South Korea are in the RCEP but not the TPP. Meanwhile, China and South Korea are <a href="http://www.cnbc.com/2017/03/14/china-south-korea-join-tpp-members-in-trade-talks.html">having talks</a> with the other countries in the TPP.</p>
<p>For the Latin American countries, access to the Chinese and South Korean markets through the RCEP would be significant. After all, the US already has lower tariffs on average than emerging markets; Mexico and Canada are part of NAFTA; Chile has had an agreement with the US <a href="https://ustr.gov/trade-agreements/free-trade-agreements/chile-fta">since 2004</a>; and while Peru does not have an exclusive trade agreement with the US, it has had a promotion agreement to liberalise the services trade <a href="https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa">since 2009</a>. </p>
<p>Even with the US departure from the TPP, Canada, Chile, Mexico and Peru are well positioned for US trade through other agreements.</p>
<p>For the Asian countries, losing privileged access to the American market is certainly a blow, since geographical proximity and other economic ties already give them access to the Chinese and South Korean markets.</p>
<p>The reason trade agreements are not more plentiful is because <a href="https://theconversation.com/redesigning-nafta-is-not-a-bad-idea-if-workers-rather-than-vested-interests-win-76861">vested interests usually fight</a> tooth and nail to maintain their privileged position in local markets. Local companies tend to play the nationalist card – we create jobs! – and advance only a myopic view to convince politicians to abandon free trade deals. </p>
<p>Importing industries are <a href="https://www.econstor.eu/bitstream/10419/26285/1/559514182.PDF">less productive than exporting industries</a>. This is intuitive. If an importing industry were more efficient than the rest of the world, it would not be an importing industry in the first place.</p>
<h2>More than trade</h2>
<p>What is also lost in discussion is that the TPP is much more than a simple trade agreement. It also covers services and intellectual property. </p>
<p>While the US trade deficit in the first quarter of 2017 was approximately <a href="https://www.bea.gov/international/">US$65 billion a month</a>, the surplus in services offset a third of it. US exports in the service sector include <a href="https://www.bea.gov/newsreleases/international/trade/2017/trad0317.htm">over US$10 billion in royalties</a> on the use of American intellectual property. </p>
<p>The TPP would have been highly beneficial to the interests of the US software, publishing and financial firms. But to try to recapture the way of life of the 1950s, American politicians are forgetting about the industries of the 21st century. </p>
<p>At any rate, a zero trade deficit is a mirage in the case of the US. The country does not lose by importing more than it exports. It just means that it’s productive in other sectors. The <a href="https://www.bloomberg.com/news/articles/2017-03-01/trump-trade-friction-overlooks-america-s-huge-surplus-in-services">American financial sector is particularly strong</a> worldwide. </p>
<p>By withdrawing from the TPP, the US left a significant gap, as the total size of the trade agreement shrunk considerably. </p>
<p>The RCEP may fill it, or the countries may forge ahead without the US. It won’t be the same without the American market, but it should still bring enough benefits for the remaining countries to make it worthwhile to go through the trouble of enacting it.</p>
<p>While it may have been politically expedient, candidate – and now President – Trump was absolutely wrong when he said that “<a href="http://time.com/4386335/donald-trump-trade-speech-transcript/">trade reform</a> and the negotiation of great trade deals is the quickest way to bring our jobs back to our country”. </p>
<p><a href="http://www.apec.org/Press/News-Releases/2017/0516_tran">Globalisation is inevitable</a> and irreversible, as Vietnam’s president recently mentioned. </p>
<p>Most economists agree that free trade generates wider and greater benefits, and that’s why the US used to be a big promoter of deals such as the TPP. </p>
<p>The current US flip-flop is bad for the World Trade Organisation, which is likely to <a href="https://www.wto.org/english/news_e/news17_e/anti_10may17_e.htm">see more anti-dumping cases</a> (a dispute when <a href="https://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm">a country accuses another</a> of exporting goods at less than their normal value) by and against the US; for multilateral agreements, such as the TPP; and for the world, as protectionist talk increases the probability of trade wars.</p><img src="https://counter.theconversation.com/content/78105/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rodrigo Zeidan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The TPP should still bring enough benefits for the remaining countries to make it worthwhile to go through the trouble of enacting it.Rodrigo Zeidan, Associate Professor, NYU Shanghai and Fundação Dom Cabral, NYU ShanghaiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/717962017-01-25T02:59:30Z2017-01-25T02:59:30ZThere’s no point to Australia’s push to ratify the TPP<p>With all the debates <a href="https://theconversation.com/why-china-could-never-sign-on-to-the-trans-pacific-partnership-56361">on whether China</a> will join the <a href="https://theconversation.com/au/topics/tpp-7972">Trans Pacific Partnership (TPP) Agreement </a> now that President Trump has officially rejected it, or if the TPP can exist as a 12 nations minus one agreement, you’d be forgiven for thinking it still could go ahead. It can’t.</p>
<p><a href="https://theconversation.com/trump-trade-and-the-tpp-seven-essential-reads-71845">The agreement itself</a> states that to come into effect, six of the 12 original signatories must ratify the treaty, and together these six must <a href="http://dfat.gov.au/trade/agreements/tpp/official-documents/Documents/30-final-provisions.pdf">represent 85% of the total GDP of all 12 original signatries</a>. The US alone accounts for a massive 60% of this combined GDP. So US rejection is indeed a deal breaker. </p>
<p>What is surprising, on the other hand, is Prime Minister Malcolm Turnbull’s declaration that he will push ahead with the TPP’s implementing legislation in Australia, despite America’s withdrawal. So what is the sense in such a move? </p>
<p>Not surprisingly, domestic politics goes someway towards explaining Turnbull’s actions. The Turnbull-led government – like the Abbot-led one before it – has put trade agreements at the centre of its otherwise sparse economic policy agenda. </p>
<p>Upon signing the deal, the Liberal-National Coalition heralded the TPP as a landmark win that would deliver enormous economic opportunities to Australia (just as it claimed the Japanese, South Korea and Chinese deals before it would). Never mind that modelling showed only modest gains would flow from the TPP (and other deals) to quite a narrow set of Australian constituents. <a href="http://pubdocs.worldbank.org/pubdocs/publicdoc/2016/1/847071452034669879/Global-Economic-Prospects-January-2016-Implications-Trans-Pacific-Partnership-Agreement.pdf">According to the World Bank</a>, the TPP was expected to increase Australia’s GDP by only 0.7% by 2030. </p>
<p>And never mind that the government’s “big win” narrative ignored the obvious costs associated with these deals for Australians more generally, thanks to intellectual property and investor state dispute provisions. Putting facts aside, the government’s messaging was that the TPP was a massive win for Australia. </p>
<p>To now simply let the deal go without some major public hand-wringing would contradict this narrative. So even if the continued pursuit of the TPP is futile, the government can’t be seen to be letting go of its “crowning economic achievement” without a fight. </p>
<p>Beyond domestic politics, Turnbull has publicly argued that a key reason to still pass the TPP legislation is to send a signal to the world of Australia’s ongoing commitment to – and the importance of - “free trade” in the face of growing American protectionism. But the logic of this argument is flawed. </p>
<p>It assumes that the TPP embodies free trade ideals. It does not. </p>
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<img alt="" src="https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1222&fit=crop&dpr=1 600w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1222&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1222&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1536&fit=crop&dpr=1 754w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1536&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1536&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="attribution"><a class="source" href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx#negotiation">Department of Foreign Affairs and Trade/The Conversation</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>Like most of the trade agreements signed by Australia over the past decade or so, the TPP is only marginally about the “conventional” trade issue of expanding exports and imports through the removal of tariff and other barriers to trade. This is why economic modelling has estimated that only very modest gains will accrue to Australia from TPP-related export expansion over the next decade – despite the government touting the deal as a huge economic win for Australia. </p>
<p>In fact, the most significant and most controversial aspects of the TPP embody the opposite of “free trade” principles. Take the deal’s <a href="https://theconversation.com/ip-trade-negotiations-a-prescription-for-harm-20141">intellectual property (IP) provisions</a>. These would further extend the monopoly rights (and rent-seeking behaviour) of large corporations through changes to patent and copyright laws, delaying competition and keeping the price of IP-protected goods (like pharmaceuticals) higher for longer. </p>
<p>Then there are the deal’s <a href="https://theconversation.com/au/topics/isds-16000">investor state dispute settlement (ISDS)</a> provisions. These would give foreign companies the right (not afforded to local firms) to sue the Australian government for regulatory changes aimed at advancing important health, environmental and other social and economic goals. </p>
<p>In this brave new world, regulations to prevent profit shifting by multinational corporations or to mitigate climate change could be subject to legal action – and hefty fines imposed on the Australian government (read: Australian taxpayers). This is<a href="http://cdn.getup.org.au/1931-Canary-in-the-Coal-Mine-Summary.pdf"> precisely the fate that befell the Canadian government</a> and its citizens after it agreed to ISDS provisions in its trade deal with the United States. </p>
<p>In sum, the TPP is not principally – or even largely - about “free trade”. This is precisely why so many people across Australia and around the globe are opposed to it, and precisely why it is so disingenuous of the PM to brand all of its detractors as “anti-free traders” or “protectionists”. </p>
<p>Indeed, if Turnbull’s aim is to signal to the world Australia’s commitment to liberal principles and freer trade, then abandoning the TPP would be a sound first step. </p>
<p>Of course, there may be another reason for Turnbull’s continued pursuit of the TPP: to establish Australia (and Turnbull himself) as a key trade policy maker (rather than taker) in the region; to demonstrate to our regional friends that Australia is capable of leading an ambitious and expansive trade agenda, even in the absence of US sponsorship. </p>
<p>But if this is the aim, then surely it won’t be achieved by continuing to flog a deal so clearly and so closely associated with US corporate and geo-strategic interests (at least as they were understood by the Obama Adminstration). </p>
<p>America’s rejection of the TPP presents a unique opportunity for the Turnbull government: to acknowledge in the face of overwhelming global and local opposition that the international trade agenda has gone off track. If the government’s aim is to become a trade policy maker, not taker, in the region, then an incredible opportunity now exists to do so: by rejecting the TPP and and returning the goal of freer trade to the centre of our nation’s trade policy agenda. </p>
<p>The first step in doing so would be to reject once and for all provisions like ISDS and IP extension that enjoy so little support in this country and elsewhere and that would cost more than benefit the Australian public (not to mention our developing country neighbours for whom such provisions are even more economically and socially damaging). This would also require Australia to take a strong new stance in <a href="https://theconversation.com/if-the-tpp-dies-australia-has-other-game-changing-trade-options-64291">the negotiations of the China led trade deal</a>, the Regional Comprehensive Economic Partnership, that like the TPP is also now pushing into areas like ISDS and IP extension. </p>
<p>The TPP was <a href="https://theconversation.com/why-trump-is-right-and-wrong-about-killing-off-the-tpp-69045">a bad deal for Australia (and the US)</a> before Trump was elected – and it remains a bad deal today. But its failure presents an unprecedented opportunity for Australian policymakers to rethink and redefine the national and regional trade policy agenda – as well as chart a new direction for our international involvement - if they are brave enough to take it.</p><img src="https://counter.theconversation.com/content/71796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elizabeth Thurbon has previously received funding from the Australian Research Council and the Korea Foundation. She is an academic advisor to the Jubilee Australia Research Centre. </span></em></p>The TPP can’t go ahead in any form, so its time the Australian government lets it go.Elizabeth Thurbon, Associate Professor in International Relations / International Political Economy, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/713302017-01-17T04:59:30Z2017-01-17T04:59:30ZBrexit, Trump and the TPP mean Australia should pursue more bilateral trade agreements<p>Brexit, Trump’s protectionist agenda and the debacle of getting everyone to ratify the unpopular Trans-Pacific Partnership (TPP) are all a global trend towards bilateral trade agreements.</p>
<p>This is good news for Australia. With its <a href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx">manifold set of strong free trade agreements</a>, Australia is geared up to reap the early gains of this new trend. </p>
<p>The domestic squabble between Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten on whether the “<a href="http://www.sbs.com.au/news/article/2017/01/16/tpp-dead-water-shorten">the TPP is dead in the water</a>” meant that Turnbull’s ongoing support for the Regional Comprehensive Economic Partnership (RCEP) went unnoticed. This signals that, unlike the TPP, the Chinese-led trade deal RCEP is alive and well, and that both sides of Australian politics support it. </p>
<p>Considering the existing spaghetti bowl of international economic partnerships, Australia is already in the fast lane of bilateral trade agreements with the US and China. In fact, Australia is the second largest economy and trading partner of the only six countries that have in place free trade agreements with both <a href="http://trade.gov/fta/">the US</a> and <a href="http://fta.mofcom.gov.cn/english/index.shtml">China</a>. The group includes South Korea, Singapore, Chile, Peru’ and Costa Rica.</p>
<p>If Australia quickly wraps free trade agreements with Canada, the European Union and the United Kingdom, Australia will be the only major trading link among these countries, with evident growth opportunities on favourable terms. </p>
<p>When it comes to trade deals already in force, Australia’s trade portfolio includes many bilateral agreements, but only one regional trade agreement (with the Association of Southeast Asian Nations). </p>
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<span class="attribution"><a class="source" href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx#negotiation">Department of Foreign Affairs and Trade/The Conversation</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<h2>Trade deals with multiple countries are dead</h2>
<p>Promoting international trade has always been important to <a href="http://dfat.gov.au/trade/economic-diplomacy/Pages/economic-diplomacy.aspx">Australia’s economy</a>, to encourage growth, attract investment and support business. For the past two decades Australia has been <a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/9CDC187A7F76FB53CA25773700169C4B?opendocument">expanding its trade policy agenda</a> with multilateral, regional and bilateral trade agreements.</p>
<p>There are only two multilateral trade agreements under negotiation which involve Australia. One is under the World Trade Organisation (WTO) umbrella (the Environmental Goods Negotiations) and the other is in competition with the WTO system (the <a href="https://theconversation.com/wikileaks-reveals-the-tisa-agreement-could-cost-australian-services-63199">Trade in Services Agreement – TiSA</a>).</p>
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<p>The tumultuous political events of 2016 in the US and Europe confirm Kevin Rudd’s remark that “the West has turned inward”, while the Asia Pacific region is emerging as the <a href="http://www.internationalaffairs.org.au/australian_outlook/china-and-asean-torchbearers-for-free-trade/">torchbearer for free trade and economic integration</a>.</p>
<p>For the past few years there’s been disagreement on which type of agreement is best for Australia’s trade policy: <a href="https://theconversation.com/multilateral-regional-bilateral-which-agreement-is-best-19664">multilateral, regional or bilateral</a>.</p>
<p>The <a href="https://www.nytimes.com/2016/01/01/opinion/global-trade-after-the-failure-of-the-doha-round.html">failure of the WTO’s Doha round</a> of trade negotiations has undermined the credibility of the multilateral trading system. With the US and Japan denying China the <a href="http://www.wsj.com/articles/u-s-wont-grant-china-market-economy-status-u-s-senior-official-says-1481318577">market economy status</a> sanctioned by its WTO accession, multilateralism is further out of question. </p>
<p>When a country grants China market economy status, it can no longer impose punitive <a href="https://www.euractiv.com/section/trade-society/news/china-starts-trade-battle-over-market-economy-status/">anti-dumping tariffs on Chinese-made goods</a>. More than ten years ago, Australia was fast to <a href="http://dfat.gov.au/trade/agreements/chafta/Documents/mou_aust-china_fta.pdf">recognise China’s full market economy status</a> as a precondition of the China-Australia Free Trade Agreement (ChAFTA), which <a href="http://dfat.gov.au/trade/agreements/chafta/news/Pages/ChAFTA-in-force-now.aspx">entered into force on 20 December 2015</a>.</p>
<p>If multilateralism is dead, regional trade agreements are also not looking so good outside of Asia. <a href="http://www.bilaterals.org/?eu-sees-pause-in-talks-on-free">With the rise of Trump and anti-EU sentiment</a>, the Transatlantic Trade and Investment Partnership (TTIP) <a href="https://theconversation.com/the-ttip-trade-deal-is-lost-at-sea-60132">is lost at sea</a>, and so is the EU-Canada <a href="http://www.euractiv.com/section/trade-society/news/parliament-committee-gives-ceta-thumbs-down/">Comprehensive Economic and Trade Agreement (CETA)</a>. </p>
<h2>The benefits of bilateralism</h2>
<p>Australia has a once-in-a-generation economic opportunity to exploit the cracks opened in the international trading system by the stark return to bilateral agreements. Australia is already poised to negotiate two such agreements <a href="http://dfat.gov.au/geo/canada/Pages/canada-country-brief.aspx">with Canada</a> and <a href="http://dfat.gov.au/trade/agreements/aeufta/Pages/aeufta.aspx">the EU</a>.</p>
<p>Brexit is creating further ripples in the economic diplomacy waters. For example, in Canberra there are loud voices calling for <a href="http://www.abc.net.au/news/2017-01-10/brexit-abbott-calls-on-uk-to-prioritise-fta-with-australia/8173082">“absolutely free” trade between Australia and the UK</a>. According to some, a full-blown China-US trade war fought on currency manipulation is the <a href="http://www.abc.net.au/news/2017-01-11/trade-war-between-us-and-china-a-major-threat-to-australia/8172562">single biggest economic threat to Australia</a>. A falling Chinese currency in combination with US protectionist measures would dampen the Chinese economy by way of reduced volumes of exports and higher interest rates spreading across the Asia Pacific and pushing down the price of commodities. </p>
<p>However, it’s highly unlikely that monetary dynamics alone will damage Australia’s “rocks and crops” economy. The growing productivity of the <a href="https://www.oecd.org/tad/events/Mr.%20Merrilees_Agricultural%20productivity%20growth%20reforms%20opportunities.pdf">agricultural</a> and <a href="https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/presentations/australian-mining-productivity-201310.pdf">mining sectors</a> is strong enough to rise above global tensions and falling commodity prices. Australia’s <a href="http://www.lngworldnews.com/australia-lng-exports-to-rise-40-percent-in-2016-17/">export volumes in key markets are poised to further rise</a> in a situation where trading partners will already be warring for the best market and investment opportunities. </p>
<p>A protectionist western economy across the Atlantic will further swing the global pendulum of economic growth to Asia. It will also amplify the positive effects of further economic integration in that region for Australia.</p>
<p>When the RCEP comes into force, Australia will have privileged access to China’s One Belt One Road (OBOR) initiative, the so called <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/ChinasRoad">new Silk Road</a>. This development will lead to massive infrastructure investment and trade opportunities for Australia, even more so as it has the comparative advantage of being a highly developed economy with privileged access to Western know-how. </p>
<p>As cynical as it may sound, at present Australia’s economic fortunes depend on juggling free trade with both a commanding Asian region and a disunited west. Essentially, if Australia manages to keep a trade policy that is geopolitically neutral, its economy will thrive on unsavoury developments.</p>
<p>Some of these include the success of Trump’s protectionist agenda, which may <a href="https://www.theguardian.com/us-news/2017/jan/16/europes-fate-is-in-our-hands-angela-merkels-defiant-reply-to-trump">deteriorate the US relations with NATO and the EU</a>, to the point of fuelling European nationalism and disintegration.</p>
<p>Another questionable development, yet positive for Australia, is <a href="https://intpolicydigest.org/2015/03/04/the-re-militarization-of-japan/">Japan’s re-militarisation</a> to contain China’s rise. The preservation of the postwar institutional framework that guarantees economic openness and the prospect of economic and political security in the the Asia Pacific region may soon require <a href="http://www.internationalaffairs.org.au/australian_outlook/tough-choices-for-australia-and-japan/">tough choices for Australia and Japan</a>.</p>
<p>With Japan standing in for the US security role in East Asia, Australia would take a sweet deal to become the neutral and peace-monger Switzerland of Asia.</p><img src="https://counter.theconversation.com/content/71330/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA), with the Contemporary European Studies Association of Australia (CESAA), and with NOMIT Inc (Network of Italians in Melbourne. </span></em></p>It seems in the current global turbulence multilateral trade deals are dead, long live bilateral agreements.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/686852016-11-18T07:24:14Z2016-11-18T07:24:14ZChina capitalises on Trump’s hostility to trade with a new deal for Asia-Pacific<p>Donald Trump’s election has turned established ideas about trade in Asia on their head. Trump has said he will <a href="http://www.theatlantic.com/business/archive/2016/11/tpps-death-wont-help-the-american-middle-class/507683/">pull America out of the Trans-Pacific Partnership</a>, a trade deal between the US and 11 other countries in Asia, Oceania and South America. </p>
<p>The threat to the trade agreement has led to a revival of interest in the China-led Free Trade Area for the Asia-Pacific (FTAAP) as the new architecture for trade and economic integration in the region. </p>
<p>Without US ratification, the agreement cannot come into effect. At least six of its 12 members (US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru), <a href="https://theconversation.com/drafts/68685/edit">accounting for a minimum of 85%</a> of the bloc’s economic size, need to ratify the deal for it to start operating. </p>
<p>The US is the largest economy in the bloc, accounting for almost 60% of its total economic size. Even if all the other members ratify the deal, it cannot become functional without the US.</p>
<p>A stalled Trans-Pacific Partnership <a href="https://theconversation.com/after-trumps-win-can-china-dislodge-asian-nations-from-the-us-orbit-68584">opens the way for China</a>, which was excluded from the agreement, to assume leadership in regional economic integration efforts in the Asia-Pacific.</p>
<p>China has said <a href="http://www.reuters.com/article/us-china-diplomacy-trade-idUSKBN1350S4?feedType=RSS&feedName=businessNews">it will push for the FTAAP</a> at the Asia-Pacific Economic Cooperation meeting in Lima, Peru on November 19 and 20.</p>
<h2>The politics of trade</h2>
<p>The Trans-Pacific Partnership has largely been steered by the US. Apart from reflecting various characteristics of existing US free trade agreements – in terms of the wide range of issues covered and the scope of the regulatory framework proposed – the deal is also a <a href="http://www.worldcommercereview.com/publications/article_pdf/1003">collection of US defence allies and partners</a> from the Asia-Pacific region. </p>
<p>For several months, the Barack Obama administration has repeatedly emphasised that the Trans-Pacific Partnership acts as a <a href="https://ustr.gov/tpp/">framework that allows the US to write trade rules</a> for the region, rather than leaving China to do so. This emphasis has also underpinned the agreement’s importance in terms of <a href="http://www.scmp.com/news/china/policies-politics/article/1876024/its-geopolitics-stupid-us-led-tpp-trade-pact-less-about">the US and its allies containing China</a>.</p>
<p>While the final fate of the trade agreement is still unknown, president-elect <a href="http://www.theatlantic.com/business/archive/2016/11/tpps-death-wont-help-the-american-middle-class/507683/">Donald Trump’s rejection of the deal</a>, along with strong opposition by several <a href="https://newswire.net/newsroom/news/00088402-mass-protests-in-washington-amid-tpp-controversy.html">other domestic political actors and groups</a> within the US, makes the prospect of its passage by the US Congress rather dim. </p>
<h2>China fills the gap</h2>
<p>The template for the Free Trade Area for the Asia-Pacific would arguably be that of the <a href="https://theconversation.com/rcep-the-trade-agreement-youve-never-heard-of-but-should-be-concerned-about-42885">Regional Comprehensive Economic Partnership</a> (RCEP), a 16-member regional trade agreement currently being negotiated. It includes China, Cambodia, India, Indonesia, Laos, Myanmar, the Philippines, South Korea, Thailand, and several members of the Trans-Pacific Partnership – Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam – but not the United States.</p>
<p>The <a href="http://keionline.org/rcep">RCEP’s large economic size</a> – it accounts for a third of the global GDP and almost half of the world’s population – makes it a significant economic framework. Liberalisation of market access among proposed member countries, which include large economies such as Japan, China, India, South Korea, Australia and Indonesia, would go a long way towards creating a pan-regional free trade agreement for the Asia-Pacific. </p>
<p><a href="http://www.thehindu.com/business/rcep-members-worried-about-giving-more/article9291663.ece">Its focus is on</a> freeing up market access, mostly by eliminating tariffs, enhancing trade facilitation among members and liberalising cross-border investment rules. It has avoided politically sensitive trade issues such as labour, environment, government procurement and state-owned enterprises that are in the TPP.</p>
<p>Politically, it’s an easier template for negotiating country governments to handle compared with the Trans-Pacific Partnership. It will also be easier to take forward as a more acceptable framework for integrating the entire Asia-Pacific with common trade rules, given the region’s economic diversity and co-existence of developed high-income economies (such as Australia, Japan, South Korea, and New Zealand) with upper-middle- and lower middle-income countries (such as China, Indonesia, Malaysia, Thailand, and the Philippines). </p>
<p>The members of the Trans-Pacific Partnership who are covered by RCEP would be <a href="http://www.straitstimes.com/asia/se-asia/as-tpp-falters-malaysia-looks-to-chinas-rcep-trade-pact-to-bolster-trade">looking forward to obtaining some of the trade and economic integration</a> gains they had expected from the former agreement. They can be expected to push for quick conclusion of negotiations. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/146387/original/image-20161117-18128-1j3tand.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A stalled TPP opens the way for China to assume leadership in regional economic integration efforts in the Asia-Pacific.</span>
<span class="attribution"><span class="source">Jonathan Ernst/Reuters</span></span>
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</figure>
<p>China is also expected to <a href="http://www.bloomberg.com/news/articles/2016-11-15/trump-trade-snub-set-to-boost-china-s-bid-for-its-own-asia-pact">press for an early end to RCEP talks</a>. Apart from getting liberal access to the markets of countries with whom it does not have bilateral free trade agreements, such as Japan and India, leading talks to a meaningful conclusion would allow it to establish its credentials as a rule-maker in the region. </p>
<p>This would help China upstage the US as the more effective organiser of the regional economic order. It would also position China well to propose enlarging the agreement into the proposed FTAAP by including other Asia-Pacific countries that are not in the RCEP but which did sign up to the Trans-Pacific Partnership, such as Canada, Chile, Mexico and Peru. </p>
<p>By drawing US allies into FTAAP, China would be able to capitalise on the disappointment of those feeling let down by the US. And that could considerably expand its strategic influence in the region.</p>
<h2>The difficult path forward</h2>
<p>But Chinese expectations could run into difficulties due to the strategic opposition it could encounter. Unlike the US, which had significant political influence over Trans-Pacific Partnership members for implementing a trade framework of its choice, China doesn’t have much leverage over the RCEP. </p>
<p>China’s difficult political relations with countries, such as Japan, Vietnam and India, could stand in the way of dictating rules. A political compromise might conclude the RCEP in a fashion that <a href="http://www.financialexpress.com/fe-columnist/as-trade-deals-get-unpopular-does-rcep-matters/338717/">hardly makes it economically any more meaningful</a> than the various free trade agreements and regional trade agreements that already exist in the Asia-Pacific. </p>
<p>Taking a hollow deal forward into a FTAAP will not likely have many takers in the region. And countries would probably prefer exploring individual free trade agreements among each other for additional market access gains. </p>
<p>Indeed, a stalled Trans-Pacific Partnership might further thwart China’s economic ambitions by making some of the members of RCEP apprehensive about encountering political hostility at home (akin to that <a href="https://newswire.net/newsroom/news/00088402-mass-protests-in-washington-amid-tpp-controversy.html">garnered by the Trans-Pacific Partnership</a>).</p>
<p>China could benefit from striving for a framework that combines the best of both the Trans-Pacific Partnership and RCEP. As two distinct means aiming for the same end of Asia-Pacific economic integration, they could complement each other. </p>
<p>This possibility still exists, notwithstanding the likely US withdrawal from the Trans-Pacific Partnership. Several parts of the negotiated agreement can act as a guide for issues to be incorporated in a new region-wide agreement. The focus should now be on greater inclusivity and flexibility. </p>
<p>That can happen only if the Trans-Pacific Partnership and the RCEP are not seen as attempts by the US and China to gain strategic control of the region. The stalling of the Trans-Pacific Partnership might result in this kind of competition being put on hold for the time being. And China must ensure that its role in the RCEP and growth of a FTAAP doesn’t reignite that competition. </p>
<p>An effective regional free trade agreement needs the US and China to act as rulemakers along with the rest, rather than jostling to supersede each other.</p><img src="https://counter.theconversation.com/content/68685/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitendu Palit does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A stalled Trans-Pacific Partnership opens the way for China, which was excluded from the agreement, to assume leadership in regional economic integration efforts in the Asia-Pacific.Amitendu Palit, Senior Research Fellow & Research Lead (Trade and Economic Policy) at the Institute of South Asian Studies (ISAS), National University of SingaporeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/685842016-11-15T07:21:49Z2016-11-15T07:21:49ZAfter Trump’s win, can China dislodge Asian nations from the US orbit?<p>It will be in Asia – the economic centre of the 21st century – where the future of <a href="http://www.theatlantic.com/international/archive/2012/04/the-end-of-pax-americana-how-western-decline-became-inevitable/256388/">Pax Americana</a> (the peace that has ensued as a result of US hegemony) will be decided. </p>
<p>This continued existence of this peace will depend, to a significant extent, on Washington’s capacity to show that it remains a vital actor in the region despite China’s ascendancy. And, above all, that it is still the <a href="http://www.cfr.org/japan/us-japan-security-alliance/p31437">provider of security guarantees</a> to several of China’s neighbours, such as Japan and South Korea.</p>
<p>If Beijing can bring its neighbours to accept its regional leadership (including its claims in the South China Sea), China could dramatically reduce US influence in a region that holds <a href="http://www.worldometers.info/world-population/asia-population/">more than half of the world’s population</a>.</p>
<p>That this desire would emerge in Beijing is far from surprising. No aspiring great power gains status or respect by ceding responsibility for security in its backyard to a far away foreign nation.</p>
<h2>Chinese initiative and US pushback</h2>
<p>To garner regional support, China has launched a series of high-profile initiatives that involve its neighbours in institutional setups: the <a href="http://www.reuters.com/article/us-asia-aiib-investment-idUSKCN0UU03Y">Asian Infrastructure Investment Bank</a>, the <a href="http://www.postwesternworld.com/2015/03/21/cica-american-security-architecture/">Conference on Confidence Building Measures in Asia</a> security architecture, and economic corridors through Pakistan and Myanmar to the Indian Ocean.</p>
<p>Beijing’s efforts have been derided as “<a href="https://www.ft.com/content/abb35db2-a4cc-11e6-8b69-02899e8bd9d1">chequebook diplomacy</a>” and China has been accused of trying to <a href="https://www.ft.com/content/23968248-43a0-11e6-b22f-79eb4891c97d">buy friends</a>. But if successful, the country’s endeavours will contribute to the creation of an increasingly <a href="http://www.postwesternworld.com/2014/11/21/chinas-towards-sinocentric/">Sinocentric Asia</a>. </p>
<p>China’s most ambitious project is the New Silk Road Economic Belt, usually referred to as <a href="http://www.postwesternworld.com/2016/11/06/political-economy-chinas/">One Belt One Road</a>. This proposed economic corridor will stretch across Eurasia to connect China not only to the Middle East and Europe but also embed it within the region. </p>
<p>One Belt One Road is said to <a href="http://www.postwesternworld.com/2016/11/06/political-economy-chinas/">involve Chinese investments</a> of between US$800 billion and US$1 trillion, covering almost 900 projects in more than 60 partner countries – a truly monumental initiative. Several <a href="http://www.bloomberg.com/news/articles/2016-08-07/china-s-marshall-plan">commentators have drawn parallels</a> between the policy and the <a href="https://history.state.gov/milestones/1945-1952/marshall-plan">1948 US Marshall Plan</a> that helped rebuild postwar Europe. </p>
<p>The US reaction to China’s initiatives has been on two tracks. First, it sought to thwart the Asian Infrastructure Investment Bank, <a href="http://www.postwesternworld.com/2014/11/09/washingtons-opposition-development/">pressuring other countries not to join</a>. This effort failed spectacularly when the United Kingdom, the most important US ally, became <a href="http://www.postwesternworld.com/2015/03/14/camerons-masterstroke-development/">the first to break ranks</a>. The bank now has 50 members, including many US allies from around the world. </p>
<p>US policymakers also promoted <a href="https://theconversation.com/tpp-revealed-at-last-we-have-the-details-and-a-democratic-deficit-to-be-fixed-50232">the Trans-Pacific Partnership</a> (TPP), a trade agreement linking the United States, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. If ratified by all participating countries’ legislatures, it will be the first real manifestation of President Barack <a href="https://theconversation.com/uncertainty-on-security-and-trade-worry-allies-in-asia-as-us-election-approaches-67868">Obama’s “pivot to Asia”</a>, which has so far consisted of little more than rhetoric.</p>
<p>China, which is excluded from the TPP, responded by promoting the <a href="http://www.postwesternworld.com/2015/08/21/tussle-regional-influence/">Regional Comprehensive Economic Partnership</a> (RCEP), which excludes the United States, and which would promote rapprochement between Beijing and Tokyo. The RCEP includes a vast array of rules concerning investment, economic and technical cooperation, intellectual property, competition, dispute settlement, and government regulation.</p>
<h2>Exceptional allies</h2>
<p>This jostling between the US and China for influence in Asia explains why alarm bells started ringing in Washington when the Philippine President Rodrigo Duterte <a href="http://www.businessinsider.com/philippines-rodrigo-duterte-separation-impression-americans-2016-10">announced a “separation” from the United States</a>. Indeed, quite a lot of Duterte’s rhetoric since his election has brought into question his nations’s <a href="https://theconversation.com/he-may-have-insulted-obama-but-duterte-held-up-a-long-hidden-looking-glass-to-the-us-65085">decades-long partnership with Washington</a>. </p>
<p>A month later, Malaysia’s Prime Minister Najib Razak <a href="http://nationalinterest.org/feature/what-are-the-philippines-malaysia-doing-when-it-comes-china-18298">initiated what seemed like a rapprochement</a> with Beijing when he announced the purchase of coastal patrol ships from China. This is the first substantial defense contract between Kuala Lumpur and Beijing and a significant signal, given the <a href="https://www.ft.com/content/76e53d98-a031-11e6-891e-abe238dee8e2">US had also hoped for a deal</a> with Malaysia.</p>
<p>These moves were particularly surprising because both the Philippines and Malaysia are claimants to disputed islands and reefs in the <a href="https://theconversation.com/explainer-what-are-the-legal-implications-of-the-south-china-sea-ruling-62421">South China Sea</a>. Washington had hoped that the tension there could be used to <a href="https://www.ft.com/content/76e53d98-a031-11e6-891e-abe238dee8e2">build an alliance to contain Beijing</a> in the region and put international pressure on China.</p>
<p>The Philippines is the only South China Sea claimant that is <a href="http://www.wsj.com/articles/china-philippines-set-south-china-sea-dispute-aside-1476959210">also a US treaty ally</a>. The two countries recently concluded the <a href="http://cnnphilippines.com/news/2016/01/13/what-you-need-to-know-about-edca.html">Enhanced Defence Cooperation Agreement</a>, allowing Washington access to five Philippines military sites.</p>
<p>But there are several reasons why the Philippines and Malaysia can be seen as outliers. Their leaders have specific reasons to tilt towards Beijing that don’t apply to other US allies in the region. </p>
<p>Duterte’s <a href="https://theconversation.com/philippines-cannot-build-a-nation-over-the-bodies-of-100-000-dead-in-dutertes-war-on-drugs-64053">controversial “war on drugs”</a>, involving systematic human rights violations, has generated US criticism. And, in Malaysia, Najib has been under pressure after US investigations revealed a giant fraud committed by <a href="https://theconversation.com/malaysia-in-turmoil-as-pm-focuses-on-survival-45422">1MDB</a>, a state investment fund.</p>
<h2>Where to now?</h2>
<p>It’s important to also keep in mind that pro-China rhetoric doesn’t always match actions. Malaysia now conducts military exercises with Beijing, but its ties to the US <a href="http://thediplomat.com/2016/11/malaysia-is-not-pivoting-to-china-with-najibs-visit/">are still stronger</a>. With the exception of North Korea, Laos and Cambodia, China’s neighbours are all still closer to Washington than Beijin. </p>
<p>And the United States remains far more popular than China among Asian people, reflected by the far larger number of Asians who aspire to move to the United States than to the Middle Kingdom. </p>
<p>Nonetheless, the US plan to maintain strong political influence in Asia and build alliances to contain China faces significant obstacles. Many US allies not trust each other (Japan and South Korea, for instance). And this may lead to collective action problems, such as what’s know in international relations theory as “<a href="https://blog.richmond.edu/fall10plsc250/2010/11/22/free-rider-problem-and-alliances/">free-riding</a>” – when actors benefit from public goods without making a contribution.</p>
<p>What’s more, many countries in the region are increasingly dependent on China’s economy, reducing their willingness to oppose Beijing. Even though, in principle, they are more likely to oppose China than support it, given its proximity and regional leadership ambitions.</p>
<p>As president-elect <a href="https://theconversation.com/donald-trumps-presidency-could-be-a-disaster-for-the-global-economy-68551">Donald Trump’s support for the Trans-Pacific Partnership</a> is very unlikely, and with China’s initiatives entangling the region’s economies with its own, time is clearly on Beijing’s side.</p>
<p>Countries in the region will <a href="http://thediplomat.com/2016/09/the-post-western-world-and-the-rise-of-a-parallel-order/">probably opt for a hedging strategy</a>: maintaining the United States as a security ally, but benefiting from broader economic integration with China. </p>
<p>Some of these, such as Vietnam and the Philippines, could emerge as the greatest beneficiaries of this dynamic, provided they play their cards right. Duterte, for instance, may <a href="https://www.ft.com/content/28eb69ca-99cc-11e6-b8c6-568a43813464">simply be trying to extract</a> stronger security guarantees from the United States, while obtaining more Chinese aid. </p>
<p>While mounting tensions between the West and Russia and continued instability in the Middle East remain relevant and will require US attention, it’s in China’s neighbourhood where the future of global order will be determined.</p><img src="https://counter.theconversation.com/content/68584/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oliver Stuenkel 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>If Beijing can bring its neighbours to accept its regional leadership, China would have successfully achieved a dramatic reduction of US influence.Oliver Stuenkel, Assistant Professor of International Relations, Fundação Getulio VargasLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/642912016-09-05T01:30:04Z2016-09-05T01:30:04ZIf the TPP dies, Australia has other game changing trade options<p><a href="http://www.bilaterals.org/?obama-puts-congress-on-notice-tpp">Despite last-minute efforts by the Obama administration</a>, the US Congress’ ratification of the <a href="http://dfat.gov.au/trade/agreements/tpp/pages/trans-pacific-partnership-agreement-tpp.aspx">Trans-Pacific Partnership (TPP) agreement</a> is <a href="http://www.wsj.com/articles/tpp-trade-deals-odds-fade-1469822992">in serious danger</a>. </p>
<p>The <a href="https://theconversation.com/au/topics/globalisation-backlash-29119">globalisation backlash</a> has extended to Democratic nominee Hillary Clinton, who has also turned her back on the TPP. <a href="http://www.economist.com/news/finance-and-economics/21704789-shifts-global-trade-patterns-are-fuelling-new-anti-trade-fervour">Progressive Americans remain concerned</a> with the role of free trade in rising levels of socioeconomic inequality. </p>
<p>But running alongside the crippled TPP, and potentially of more importance to Australian trade, has been the <a href="http://dfat.gov.au/trade/agreements/rcep/pages/regional-comprehensive-economic-partnership.aspx">Regional Comprehensive Economic Partnership</a>. Essentially, the RCEP is a free trade agreement (FTA) between the ten ASEAN members and the six countries with which ASEAN has existing FTAs. This includes Australia, China, India, New Zealand, Japan and South Korea. The 16 member states of the RCEP have agreed to finalise negotiations on the agreement <a href="http://www.bilaterals.org/?rcep-members-to-finalise-pact">before the end of this year</a>.</p>
<p>If, as seems likely, the RCEP is accomplished in the near future, it will be the world’s largest free-trade agreement, covering a population of 3.5 billion, or more than 50% of the world total, and about 40% of the world trade volumes. Based on the latest figures released by both the <a href="https://www.wto.org/english/res_e/statis_e/statis_e.htm">World Trade Organization</a> (WTO) and the <a href="http://dfat.gov.au/trade/resources/trade-statistics/Pages/trade-statistics.aspx">Australian Department of Foreign Affairs and Trade</a> (DFAT), the percentages below show the greater significance of RCEP to Australia’s global trade.</p>
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<p>Given the TPP agreement may never enter into force due to the <a href="http://fortune.com/2016/05/05/trans-pacific-partnership-ratification/">uncertain political landscape in the US</a>, Australia and the other six countries (New Zealand, Japan, Singapore, Malaysia, Brunei and Vietnam) that are members to both the TPP and the RCEP are focusing their international trade policies on the latter economic partnership. </p>
<h2>India’s change of tack may benefit Australia</h2>
<p>Australian food, wine and dairy sectors can make huge gains from India’s openings on the Regional Comprehensive Economic Partnership (RCEP) negotiations. This is because India recently changed negotiating strategy. For the first time, <a href="http://economictimes.indiatimes.com/news/economy/policy/india-ready-to-abolish-tariff-structure-if-rcep-promises-fdi/articleshow/53626290.cms">India signalled flexibility</a> to adopt a single-tier approach on tariff reduction in exchange for increased foreign direct investment (FDI). </p>
<p>The RCEP was somewhat stalling on India’s intention to group trading partners within the region into different tiers. The TPP had readily adopted a single tier approach on tariff reduction, albeit to be phased out over long periods, up to 20 years. </p>
<p>To date, of all the RCEP countries, India has signed FTAs only with ASEAN, South Korea and Japan, leaving out Australia, New Zealand and China.</p>
<p>For the Australia-India trade relationship, the difference between a single or three-tiered approach to tariff reduction would be significant. Previously, India offered an 80% tariff reduction to the ten ASEAN countries in tier-I; in tier-II, 65% to Japan and South Korea; whereas in tier-III, only 42.5% to Australia, New Zealand and China. The disadvantage to Australian companies wishing to access the large Indian markets of goods and services would have been significant.</p>
<p>Single-tier tariff reduction in India could prove a boon to the Australian food, wine and dairy sectors, particularly for the latter at this time of struggles caused by the milk price cuts in Australia and the <a href="https://theconversation.com/milk-price-cuts-reflect-the-reality-of-sweeping-changes-in-global-dairy-market-59251">reduced demand from China and Russia</a>.</p>
<h2>Is India’s end game compatible with Australian interests?</h2>
<p>Unlike Australia and the more developed RCEP nations, India has a strategic interest in greater liberalisation of trade and investment in IT-enabled services (ITES). For instance, India has traditionally been pursuing an easier visa regime for the movement of IT and other service professionals in service-oriented developed countries. </p>
<p>On top of that, India’s appetite for foreign capital is also growing significantly. In 2015 <a href="http://www.ibef.org/economy/foreign-direct-investment.aspx">India overtook China as the world’s top foreign direct investment</a> (FDI) destination with US$63 billion of FDI. This included high-value project announcements across the coal, oil and natural gas, and renewable energy sectors. </p>
<p>However most RCEP members are hesitant to further open up access for Indian IT service providers. On investment issues too, there is a clash between the interests of India and other RCEP member countries. For instance, there is a rising competition among cash-hungry countries, <a href="https://infrastructure.gov.au/infrastructure/fdis/index.aspx">such as Australia</a>, for <a href="http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD">China’s growing interest to invest capital overseas</a> in large infrastructure projects.</p>
<p>Despite timid improvements in recent times, <a href="http://blogs.wsj.com/indiarealtime/2016/06/01/indias-competitiveness-and-prosperity-rankings-rise-under-modi/">India is still one the least competitive economies in the world</a>. It punches below the weight of its huge market size and diversity, particularly in agriculture commodities and manufactured goods. </p>
<p><a href="http://www.res.org.uk/details/mediabrief/8964241/SERVICE-SECTOR-REFORM-The-key-to-Indias-growth-ambitions-for-manufacturing.html">Recent economic research</a> shows that India needs to address impediments to domestic and foreign competition in retail, transport, professional and other services before it can fulfil growth ambitions in its key manufacturing sectors.</p>
<p>The key issue will be how India is going to face the export strengths of non-ASEAN RCEP countries. In particular, China, but also South Korea and Japan, pose a significant <a href="http://www.bilaterals.org/?india-s-new-stance-at-rcep-may">threat to India’s manufactured goods</a>. Likewise, Australia and New Zealand have a clear interest for lower tariffs in agriculture commodities to gain <a href="http://www.bilaterals.org/?trade-talks-that-could-milk-india">greater market access in India’s food, wine and dairy sectors</a>. </p>
<p>Ultimately, the levelling of trade-offs in manufactured goods, services and investment with India is likely to make or break the whole RCEP deal. If Australia and the other non-ASEAN RCEP countries strike a far-reaching deal with India, the RCEP is likely to replace the TPP as the most significant (and polarising) free trade agreement of the present time.</p>
<h2>The future for Australia-Trans Pacific trade</h2>
<p>It’s unlikely Australia-Trans Pacific trade will collapse with the failure of the TPP. </p>
<p>Trade ministers from the United States, China and other <a href="http://www.apec.org/">Asia-Pacific Economic Cooperation</a> (APEC) forum nations are already working on a more powerful alternative. The 21 APEC members have recently promoted a <a href="http://www.apec.org/Meeting-Papers/Annual-Ministerial-Meetings/Annual/2015/2015_amm/annexc.aspx">Collective Strategic Study on Issues Related to the Realization of the FTAAP</a>, which is a “Free Trade Area of the Asia Pacific” agreement. The study is on track to be <a href="http://www.bilaterals.org/?apec-ministers-free-trade-area">released later this year</a>.</p>
<p>The study will analyse potential economic and social benefits and costs of the FTAAP. It will identify trade and investment barriers, as well as the broader socio-economic challenges that all 21 APEC forum nations may face in <a href="http://www.apec.org/Meeting-Papers/Annual-Ministerial-Meetings/Annual/2015/2015_amm/annexc.aspx">realising the agreement</a>.</p><img src="https://counter.theconversation.com/content/64291/count.gif" alt="The Conversation" width="1" height="1" />
<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>Australia should look to India rather than the US Congress to secure its next regional trade win.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/633282016-08-01T20:13:10Z2016-08-01T20:13:10ZChina will be the winner if US backs out of the TPP<p>If the United States backs out of the Trans-Pacific Partnership (TPP), a 12 member mega regional trade agreement, it could leave a gap for China to emerge the dominant trading power in the Asia Pacific.</p>
<p>The TPP has been the <a href="http://www.washingtontimes.com/news/2016/jun/20/obama-touts-tpp-trade-deal-bucks-opposition-hillar/">centrepiece of Obama’s external trade policy in his 2nd term</a>. However, with the agreement all but ratified, serious doubts are arising as to its future as both presidential candidates, Hilary Clinton and Donald Trump, have explicitly stated that they would <a href="http://thehill.com/policy/finance/289861-trade-backlash-frustrates-business">renege the agreement if elected.</a></p>
<p>The TPP is one of a number of mega regional free trade agreements currently in negotiation – the two others of note being the <a href="https://www.theguardian.com/business/2015/jul/03/what-is-ttip-controversial-trade-deal-explained">Transatlantic Trade and Investment Partnership (TTIP)</a> and <a href="http://thediplomat.com/2013/07/regional-comprehensive-economic-partnership-rcep-issues-and-way-forward/">the Regional Comprehensive Economic Partnership (RCEP).</a> </p>
<p>These agreements have emerged mostly because the international political system is currently undergoing a seismic shift from one strong power to many strong powers. As the United States’ position as the <a href="https://www.foreignaffairs.com/articles/united-states/2008-05-03/future-american-power">unquestioned top-dog begins to fade</a>, the system is becoming far more <a href="http://acme.highpoint.edu/%7Emsetzler/IntlSec/IntlSecReads/multipolarismHowItWillWork.CH1109.6.pdf">contentious and competitive.</a></p>
<p>This is all occurring at a time of <a href="http://isnblog.ethz.ch/international-relations/interview-robert-o-keohane">unprecedented global economic interdependence</a>. In this system, having economic power is arguably more useful than out-and-out military power, <a href="https://www.foreignaffairs.com/articles/russian-federation/2016-01-27/lights-out-putin-regime">a harsh lesson Russia is learning at the moment.</a></p>
<p>For the great powers at the helm of these agreements, there is also a clear foreign policy use, particularly as they circumvent the arguably fairer, yet crippled, <a href="http://www.forbes.com/sites/jplehmann/2015/08/03/the-tpp-the-wto-the-21st-century-global-trade-mess-and-the-poverty-of-nations/#4c088914ce29">World Trade Organisation system</a>.</p>
<p>No region is currently more competitive than Asia-Pacific. Indeed, Asia-Pacific is where the two largest international powers, the United States and China, have overlapping spheres of influence. Something of a trade contest has emerged between the <a href="http://nationalinterest.org/feature/tpp-vs-rcep-america-china-battle-control-pacific-trade-14021">United States’ TPP initiative versus China’s countervailing RCEP initiative</a>.</p>
<p>The TPP represents an important component of <a href="http://www.economist.com/news/21631836-despite-troubles-elsewhere-opportunity-beckons-america-asia-argues-ian-bremmer-president">America’s ‘Asian pivot’</a> as it aims to tie up key economic partners under rules which are favourable to the United States. Certainly, the United States’ hijacking of the TPP process, from initially being outside the negotiations to taking on a leadership role, suggests that there is a sense for the United States to <a href="http://foreignpolicy.com/2013/09/30/the-trans-pacific-partnership-and-the-decline-of-american-hegemony/">use its power advantage</a> before it is rivalled by China and others (possibly India, for example).</p>
<p>China’s motivation for the RCEP is similarly <a href="http://thediplomat.com/2014/06/chinas-fta-strategy/">about maximising its power</a>. However, whereas the United States appears motivated because of its declining power, China’s motivation clearly stems from its rising power. The RCEP seems designed to help anoint China as the regional leader of Asia <a href="http://www.straitstimes.com/opinion/the-reality-of-us-china-competition">at the expense of the United States</a>.</p>
<p>The RCEP is arguably even more ambitious, in geographic scope at least, than the TPP as it not only encompasses more countries (including India) but also has a higher projected <a href="http://qz.com/519790/thought-the-tpp-was-a-big-deal-chinas-rival-free-trade-pact-covers-half-the-worlds-population/">total GDP and percentage of global trade than the TPP</a>.</p>
<p>It has long appeared that the TPP would win out over the RCEP, or at least be implemented first. However, despite America’s clear power advantage right now, China has had some factors in its favour. </p>
<p>For starters, the RCEP is not as demanding as the TPP and rather aims to harmonise agreements already <a href="http://www.eastasiaforum.org/2012/08/27/asias-regional-comprehensive-economic-partnership/">in place under one framework</a>. This makes it domestically more palatable to potential members.</p>
<p>While democracies like America have had a hard time selling the benefits of regional trade agreements at a time when <a href="http://www.economist.com/news/united-states/21695855-americas-economy-benefits-hugely-trade-its-costs-have-been-amplified-policy">popular demand for protectionism is high</a>, China’s greater centralisation of its external trade policy (its state capitalist design) produces <a href="http://www.worldpoliticsreview.com/articles/19334/state-capitalism-and-the-return-of-economic-interventionism">fewer internal hurdles to pursuing its strategic aims.</a></p>
<p>Ultimately, if Clinton or Trump make good on their pledge to torpedo the TPP if elected, the United States will not only miss an opportunity to consolidate its position in Asia-Pacific, it will also allow China to emerge as the uncontested trade power there. </p>
<p>Such a potential outcome has surely not gone unnoticed in Washington and may precipitate Obama <a href="http://www.rollcall.com/news/politics/despite-convention-jeers-obama-to-continue-trade-push">to try and push through the agreement</a> before the new commander-in-chief assumes office later this year. Otherwise, in the absence of the TPP, the <a href="http://www.bbc.com/news/world-us-canada-33440287">United States’ inevitable decline might start earlier than anticipated.</a></p><img src="https://counter.theconversation.com/content/63328/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicholas Ross Smith 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>If the United States doesn’t ratify the Trans-Pacific Partnership, China will be more likely to succeed with its own trade agreement.Nicholas Ross Smith, Visiting scholar, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/328142014-10-14T19:32:36Z2014-10-14T19:32:36ZStaying engaged on every front: Australia’s trade policy strategy<p><em>Ten years on from the Australia-US Free Trade Agreement, Australia is entering another round of negotiations towards the new and controversial Trans-Pacific Partnership. This is the first article in the <a href="https://theconversation.com/au/topics/free-trade-scorecard">Free Trade Scorecard</a> series, in which we review Australian trade policy over the years and where we stand today on the brink of a number of significant new trade deals.</em></p>
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<p>Is Australia enhancing its economic and geo-political interests by negotiating free trade agreements (FTAs) or is it simply mindlessly engaging in world trade policy? While many commentators believe the latter to be true, Australia’s approach is more thoughtful and calculating than it is given credit for in popular media and the academic community.</p>
<p>Australia is engaged in several bilateral and regional negotiations. The most notable are the mega-regional processes led by the US and China – the Trans Pacific Partnership (<a href="http://www.dfat.gov.au/fta/tpp/">TPP</a>) and Regional Comprehensive Economic Partnership (<a href="http://www.dfat.gov.au/fta/rcep/">RCEP</a>), respectively. This is the most desirable way forward both economically and politically.</p>
<p>Australia would not be better served by focusing its trade policy on the region or adopting a Sino-focused policy. The choice of TPP or Asia and the US or China is a false dichotomy; the implications of “choosing” are too complicated to predict with any certainty. The choice is rather <em>how</em> and <em>on what terms</em> to participate in the different fora. </p>
<h2>Australia and its place in the world</h2>
<p>As a starting point, it must be remembered that Australia’s choices are limited. Australia is not the prize, nor is it in a position of power in any forum. It is a middle power increasingly dependent on world trade and investment, especially <a href="https://www.dfat.gov.au/trade/negotiations/trade_in_agriculture.html#aae">exports of agricultural products</a>.</p>
<p>Recent events such as the global financial crisis (and its ongoing effects) and the high value of the dollar have challenged Australia’s economy and significantly increased the importance of securing stable export markets. Australia is in no position to dictate trade terms. Instead, this nation must seek gains within the framework established by the larger players.</p>
<p>Of course, the optimal solution would be for Australia to seek these market opportunities through the World Trade Organisation (WTO). But <a href="http://global.oup.com/academic/product/termites-in-the-trading-system-9780195331653?cc=us&lang=en&">Jagdish Bhagwati’s call</a> to eliminate the “termites (FTAs) in the trading system” is long outdated. Focusing exclusively on the multilateral negotiations would be to ignore reality to the detriment of Australia.</p>
<p><a href="https://theconversation.com/wto-struggles-across-the-line-in-new-era-of-policy-malaise-21123">The Doha Round</a> is all but technically dead. FTAs are steadily eroding the state of equal opportunity for Australian exporters. Like it or not, the real game is being played outside the WTO.</p>
<p>While a return to multilateralism is likely at some point in the future, the timing is uncertain and the outcomes will be based on the templates established in recent FTAs. If Australia wishes to influence the future of the WTO it must participate in the FTAs of today.</p>
<h2>A multi-pronged trade strategy</h2>
<p>Most modern FTAs not only focus on tariffs but also on eliminating other forms of barriers to trade. The mega-regional providing the most innovations and rule-making - not only in terms of trade barriers but also “fair” trade - is the TPP. </p>
<p>To the US, the value of the TPP will be in its ability to expand the coverage, scope and depth of FTAs to include rules on a variety of areas including state-owned enterprises, environment and regulatory coherence of standards. I propose the ultimate aim is to garner consensus in order to make it easier to bring these innovations and rules into the multilateral system. It is in Australia’s interests to play a role in developing such norms. </p>
<p>Until Japan joined the negotiations in 2013, the potential economic gains to the US from the TPP were miniscule. The US already has FTAs in place with most negotiating partners and the economics of the TPP were quite simply unimportant. </p>
<p>The economic insignificance of the agreement to the US can be contrasted to the potential gains to Australia. The TPP could offer Australia incremental but increased access to the US and Canadian agricultural markets. Australia will also likely see increased export opportunities to Japan. </p>
<p>Even though Australia did not gain much market access for agricultural products in its recent <a href="https://theconversation.com/fta-opens-japanese-doors-for-australian-business-28861">FTA with Japan</a> – which has attracted considerable criticism – Australian exporters should temper their disappointment with the knowledge that further gains should come from the TPP. The Australia-Japan FTA must be viewed not as a standalone agreement but as a mere entrée providing initial morsels in anticipation of the main course to follow. </p>
<p>In this regard, Australia will gain when Japan and the US offer reciprocal concessions. The strategy, therefore, appears to be to wait for the US to pay for more substantial gains. </p>
<h2>We can do more than one deal at once</h2>
<p>It is important to note that while China was initially sceptical of (if not hostile to) the TPP, it has softened its views. There is no evidence to suggest it is seeking to punish TPP members. In fact, <a href="https://theconversation.com/bar-set-low-for-a-do-no-harm-china-australia-fta-32038">Australia-China FTA</a> negotiations have pushed on throughout the TPP negotiations and Australia is included in the RCEP negotiations.</p>
<p>Australia does not have to choose China or Asia over any other negotiating partner. New Zealand, Malaysia, Brunei, Vietnam and Singapore are similarly negotiating both the TPP and RCEP.</p>
<p>Turning to the RCEP, there is little reason to believe this agreement will offer any innovations on rule-making. it is also doubtful that it will produce significant market access opportunities. What the RCEP does offer is strategic engagement and geopolitical value in the region most important to Australia’s trading and diplomatic future. </p>
<p>Australia is not solely focusing on mega-regional trade agreements. Of late, Australia’s bilateral focus is squarely on the near-abroad - recent FTAs include <a href="http://www.asean.fta.govt.nz/">ASEAN-NZ</a> (2009), <a href="http://www.dfat.gov.au/fta/mafta/">Malaysia</a> (2012), <a href="http://www.dfat.gov.au/fta/kafta/">Korea</a> and <a href="http://www.dfat.gov.au/fta/jaepa/">Japan</a> (both 2014). Negotiations with China remain ongoing but may conclude soon, while talks with India and Indonesia are at an embryonic stage.</p>
<p>All of these countries are negotiating multiple agreements with several countries. In the process, they have been or continue to erode Australia’s position and export market. Australian FTAs are for the most part not about rules formation – they are standard agreements with market access at the core.</p>
<h2>The end game</h2>
<p>Australia has behaved reasonably and thoughtfully in formulating and executing its trade strategy. Its main aim is clearly to secure market access. Deeper regional economic engagement is not just desirable but necessary for Australia to maintain (and potentially increase) its export markets. </p>
<p>Australia’s recent negotiations are in line with this objective. To date, Australia has secured preferential access to three of its biggest trading partners – the US, Japan and Korea. Upon completion of the Australia–China FTA all its significant export markets will be covered.</p>
<p>These agreements provide Australia with significant preferences over competitor countries to all important export markets. No other country, with the exception of Canada, will have better or more complete coverage of its important markets. </p>
<p>At the same time, Australia has to understand the potential significance of being involved in regional negotiations of geo-political interests as well as the importance of innovations and rule-making being negotiated into the TPP. This is not to say that Australia agrees with or would advocate for the American agenda on innovations and rules. However, being involved will at a minimum allow Australia’s position to be considered, debated and potentially be included in the final form. </p>
<p>Australia must continue to stake out its best position now and into the future in order to protect export opportunities and influence future WTO negotiations. The only way of achieving this is to engage in all forms of arrangements.</p>
<p>It could be that Australia is simply pursuing “mindless engagement” without a clear sense of the key economic objectives, but the evidence does not point in that direction. Australia is benefiting strategically and economically by engaging in all types of trade negotiations.</p>
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<p><em>This article draws on research prepared for the 2014 Workshop “Ten Years since the Australia-US Free Trade Agreement: Where to for Australia’s Trade Policy?”, sponsored by the Academy of the Social Sciences in Australia and Faculty of Arts and Social Sciences, UNSW Australia.</em></p><img src="https://counter.theconversation.com/content/32814/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bryan Mercurio 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>Ten years on from the Australia-US Free Trade Agreement, Australia is entering another round of negotiations towards the new and controversial Trans-Pacific Partnership. This is the first article in the…Bryan Mercurio, Professor and Vice Chancellor’s Outstanding Fellow of the Faculty of Law, Chinese University of Hong KongLicensed as Creative Commons – attribution, no derivatives.