Author: Editorial Board, ANU
Nine months after Biden’s presidency began, it is becoming evident that the US administration does not have its own trade policy. Former President Donald Trump’s import tariffs on Chinese goods remain in place, as does his Phase 1 trade deal with China outside of established global trade rules. The WTO dispute settlement system is still unable to enforce its rules due to the US blocking the appointment of Appellate Body judges.
Deprived of new ideas, US Trade Representative Katherine Tai recently doubled China’s tariffs and the phase one trade deal. As Gary Hufbauer writes in our first article this week: “Three-quarters of Tai’s actions are Lighthizer policies with softer outlines and a smiley face.” The only new policies are the protectionist Buy American measures that limit US government procurement to domestic production. President Biden took this principle to heart and bought Trump’s “America First” trade policies.
The United States used tariffs and the threat of higher tariffs to coerce China into a bilateral trade deal, signed in January 2020. Japan was forced into a trade deal with the United States the previous year under the threat of tariffs on automobiles. The phase one trade agreement between the United States and China has moved the world’s two largest economies and trading nations to managed commerce, away from free trade.
Instead of opening up new Chinese markets, the deal focused on a deal for China to buy 380 billion US dollars value of U.S. agricultural products, manufactures, and energy by the end of 2021 – regardless of competitor interests in the Chinese market. Great powers like China and the United States rarely consider the fallout from their actions on smaller powers, even if they are allies. Purchase quotas of US $ 80 million of US agricultural products mean that China must divert imports from other import suppliers. Collateral damage has hit Australian producers considerably, with the added insult of being the target of the most blatant economic coercion China has unleashed on a country to date. American winegrowers, barley and beef producers, and coal miners have supplanted more competitive Australian producers in the Chinese market, at the behest of the United States and with deliberate Chinese complicity.
At the same time, high-level officials like Indo-Pacific Tsar Kurt Campbell claim that the United States has its backs on the very allies and partners who have been hurt by the trade diversion resulting from the management of US trade. -Chinese. As James Curran points out, when asked how “an inherently bilateral agreement that ignores the multilateral consequences of how these Chinese commitments are met” matched his insistence on the welfare of allies and others. market economies, USTR Tai had no response.
The trade coercion against Australia is just one of long lists of Chinese business practices that much of the global trading community has a problem with. China’s industrial subsidies to state-owned enterprises distort markets and competition in China, and these distortions spill over into international markets. Forced technology transfer has been demanded of many foreign companies as a price to pay for operating in the Chinese market. There are other non-market practices in China that the Phase 1 trade agreement with the United States takes root.
Certainly, China is not breaking any rules on some of these fronts, as these are areas where there are no international rules to be broken. Industrial subsidies and generalized agricultural subsidies, for example, have not yet been the subject of international agreement.
WTO rules have not kept up with modern trade developments and need to be updated. But the United States’ adoption of managed trade with China and its approach to sharing the technology market and other trade with Europe (despite the reversal of Trump’s tariffs on the steel and aluminum) is not the kind of leadership that is now needed.
Bilateral and regional agreements have tried to fill the void. Foremost among these agreements is the Trans-Pacific Partnership (TPP) for which the United States conducted negotiations, before Trump reneged on the agreement on the first day of his presidency. The TPP was saved with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which created new rules for international trade in areas where they were lacking in the WTO and opened new markets for its members. Strategically, it aimed to anchor the United States in Asia, raise trade standards, and counteract China’s economic influence.
In our second feature article this week, William Reinsch bluntly explains that “US administration officials are well aware that they have no trade policy for the region and that sending an aircraft carrier by the South China Sea every few months is really no substitute ”.
The Biden administration’s non-existent trade policy on China and the Indo-Pacific has been exposed by China’s bid to join the CPTPP. Japan (and Australia) led the conclusion of the CPTPP with the remaining 11 members of the group in 2018 after the United States exited the TPP, keeping the door open for the United States in the hope that they could eventually to recover.
The Chinese government has long and carefully considered its application for CPTPP membership and seems well aware that membership would require significant reform – the chapter on state-owned enterprises was written precisely with China and the country in mind. flexible SOE agreement for Vietnam offers no equivalent promise for Vietnam. Beijing.
China’s application for CPTPP membership offers Australia and other members the opportunity to work out their own issues with Beijing and engage on key trade reform issues of the day. The negotiation will take time but will likely be a worthwhile process, and China’s interest in the CPTPP could help push the United States back into the pact.
The Chinese negotiations with other CPTPP members before the US involvement is also a chance for Beijing to push forward its reform agenda without heavy and intrusive US breathing. And that would pave the way for China’s economic re-engagement with the United States and a path to the Asia-Pacific Free Trade Area – Beijing’s strategic response to the Obama administration’s early leaning toward the Pacific. when she launched the idea of TPP.
As Reinsch points out, the tactical route for Washington is to declare the existing CPTPP deal inadequate, as Biden has already done. He can then announce that he will fix it (although the 11 will be very reluctant to reinstate the absurd US provisions on intellectual property in a CPTPP 2.0 version of the agreement). And he can negotiate and change something, say it fixed, and join. So much the better if China was brought to the starting gate on the way to that conclusion.
A signal from the United States of interest in returning to its own accord would be a start. Removing punitive tariffs and canceling managed trade deals that the United States has with China while negotiating market opening and reform in China would be welcome across the region. This would help lock the United States into the Asian economy productively.
Removing the blockage from the WTO dispute settlement system is an easier step and would be an important indication of good faith and respect for the multilateral trading system that the United States can adopt immediately. Until then, criticizing Chinese practices while winning the Australian markets is hypocritical and continues to ring hollow.
The EAF Editorial Board is located at the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.