16 May 2019
Over the past year, the US-China trade dispute has overshadowed most other trade developments in the Asia-Pacific region. The tariffs have disrupted trade and investment flows and caused uncertainty at a time when the global economy is already facing headwinds.
The negative impacts of the dispute - which began to manifest in late 2018 and grew more acute in the first half of this year - will likely worsen following the announcement of new tariffs in May 2019.
"The WTO would ideally help reduce friction between the US and China, but it is not up to the task given its outdated rules and governance challenges.”
The conflict has left many countries in the Asia-Pacific region feeling caught in the US-China crossfire, given the importance of their trade and investment ties with the world’s two largest economies. As a result, they have sought to manage these critical relationships without alienating either country.
The World Trade Organization (WTO) would ideally help reduce friction between the US and China but it is not up to the task given its outdated rules and governance challenges. The crisis in the WTO’s Appellate Body points to this deeper problem of failing to keep up with developments in the trading and investment landscape.
An equally pressing issue is the WTO’s slowness to respond to technological advancements, particularly the digital economy. Simply put, the trade regime is in trouble and in urgent need of reform.
The US has put forward some constructive proposals for WTO reform but it has largely retreated from its leadership role in driving agreements on new trade rules and initiatives since the organisation’s creation nearly 25 years ago.
No part of the world has benefited more from the rules-based trading system than the Asia-Pacific region where trade has exploded since the creation of the WTO.
A new paper by the Asia Society Policy Institute, authored by a commission of senior trade experts from the Asia-Pacific region, reflects on the developments in the Asia-Pacific trade landscape since 2018. The paper offers recommendations to policymakers across the region on how they can continue to benefit from the economic gains and high-paying jobs created by trade, such as:
In light of the US retreat, it is time for the countries of the Asia Pacific, particularly those that are “middle powers” and trade-dependent economies, to step up and lead reform efforts in the WTO and elsewhere.
This article is based on a paper co-authored by Wendy Cutler, Vice President of the Asia Society Policy Institute and former Acting Deputy US Trade Representative; Kim Jong-hoon, former Korean trade minister; Peter Grey, former Australian trade negotiator; Mari Pangestu, former Indonesian trade minister; Yoichi Suzuki, former Japanese ambassador and trade negotiator; and Tu Xinquan, Dean of the University of International Business and Economics in Beijing.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
16 May 2019
22 May 2019