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22. Curbing State-Driven Trade Policies: How to Craft New & Effective Approaches to Counter Distortive Practices
- Author:
- Wendy Cutler
- Publication Date:
- 07-2020
- Content Type:
- Policy Brief
- Institution:
- Asia Society Policy Institute
- Abstract:
- Much attention has been focused on China’s unfair intellectual property practices and the imbalance in the U.S.-China trade relationship, but equally troubling are large-scale Chinese industrial subsidies, the behavior of state-owned enterprises (SOEs), and in general, the oversized and opaque role of the Chinese state in the economy. While the U.S-China phase one trade deal tackled some important sources of bilateral tension and aimed to boost Chinese purchases of U.S. goods and services, it was silent on industrial subsidies and related matters, leaving them for the next phase of negotiations, the fate of which is now in question. U.S. concerns on these matters are shared by other trading partners including the European Union (EU) and Japan. Yet despite widespread disapproval of such practices, building new global rules to combat subsidies has proven challenging. This is due to several factors, ranging from gridlock at the WTO, differences of views among like-minded countries on the required level of ambition, and uncertainty as to how best to approach the enormous complexities in China’s subsidies and related policies. The Organization for Economic Cooperation and Development (OECD) has sought to unpack this complexity, conducting recent studies of Chinese subsidies in two key sectors: aluminum and semiconductors. Both studies illustrate how Chinese subsidies are not simple cash handouts from the state to protected firms so that they can sell at favorable and distorting prices. The OECD finds subsidies can take various forms, including downstream or upstream help that trickles up or down to the firm that’s intended to benefit. They can take the form of favorable equity or debt purchases or bonds provided at below-market rates. And with interconnected global value chains, subsidies can effectively be granted covertly, intended to benefit one firm that might be several links away along the chain. In China, the problem is compounded by an opaque “party-state” structure that obscures not only the recipients of subsidies, but also the source. According to Mark Wu, a Harvard Law School professor who previously served as the Director for Intellectual Property in the Office of the U.S. Trade Representative, subsidies not only flow directly from government bodies in Beijing, but also indirectly through informal responses to directives — sometimes even left unsaid, but understood — from the Chinese Communist Party. Against this backdrop, the Asia Society Policy Institute (ASPI) convened two roundtables in the fall of 2019 and the spring of 2020 to discuss how best to build a new rules-based infrastructure that might combat such subsidies and prevent trade-distorting results such as unfair competition, market access barriers, and, above all, overcapacity in global markets. Experts from the private sector, think tanks, governments, and academia weighed in with possible solutions, which included: Negotiating new rules in the WTO; Using the WTO dispute settlement system, despite its often-discussed flaws; Forming ad hoc rules-based approaches, where possible, like the U.S-EU-Japan trilateral initiative; Plurilateral negotiations conducted on a sector-by-sector basis; Forming coalitions of like-minded trading partners to establish an alternative model, much in the way that the Trans-Pacific Partnership (TPP) was framed. During the roundtables, most experts agreed that there is no silver bullet that solves the subsidy and related issues on its own. And most agree that, left unaddressed, the problem is likely to deepen. The COVID-19 pandemic might even exacerbate it by leading to more state involvement in economies around the world and making it hard to discipline Beijing’s practices. Recognizing all of these real challenges that the international trade community faces, the roundtables reached the following key conclusions: Transparency on the scope, level, and nature of industrial subsidies is vital; Efforts to publicize the ongoing work in these areas, particularly that being done by the OECD, should accelerate; Turning research into tangible new policies is a key step; and Persuading China to agree to updated rules will be necessary, given that China is a singular contributor to overcapacity.
- Topic:
- International Trade and Finance, Treaties and Agreements, Trade, Industry, and WTO
- Political Geography:
- China, Asia, North America, and United States of America
23. United G20 must pave the way for robust post-COVID-19 recovery
- Author:
- Phil Thornton
- Publication Date:
- 07-2020
- Content Type:
- Policy Brief
- Institution:
- Atlantic Council
- Abstract:
- The world is facing unprecedented health and economic crises that require a global solution. Governments have locked down their economies to contain the mounting death toll from the COVID-19 pandemic. With this response well underway, now is the time to move into a recovery effort. This will require a coordinated response to the health emergency and a global growth plan that is based on synchronized monetary, fiscal, and debt relief policies. Failure to act will risk a substantial shock to the postwar order established by the United States and its allies more than seventy years ago. The most effective global forum for coordinating this recovery effort is the Group of 20 (G20), which led the way out of the global financial crisis (GFC) in 2009, the closest parallel we have to the current catastrophe. Eleven years ago, world leaders used the G20 meeting in London as the forum to deliver a unified response and a massive fiscal stimulus that helped stem economic free fall and prevented the recession from becoming a second Great Depression. A decade on, it is clear that the G20 is the only body with the clout to save the global economy. This does not mean that the G20 should be the only forum for actions for its member states. The United States, for example, should also work closely with like-minded states that support a rules-based world order, and there are many other fora where it can and must be active with partners and allies. But no others share the G20’s depth and breadth in the key focus areas for recovery. The other multilateral organizations that could take up the challenge lack either the substance or membership. The United Nations may count all countries as members but is too unwieldly to coordinate a response. The International Monetary Fund (IMF) has the resources but requires direction from its 189 members. The Group of Seven (G7), which once oversaw financial and economic management, does not include the fast-growing emerging economies. The G20 represents both the world’s richest and fastest-growing countries, making it the forum for international collaboration. It combines that representation with agility.
- Topic:
- Security, Energy Policy, G20, Global Markets, Geopolitics, Economy, Business, Trade, Coronavirus, and COVID-19
- Political Geography:
- China, Middle East, Canada, Asia, Saudi Arabia, North America, and United States of America
24. Taking stock: Where are geopolitics headed in the COVID-19 era?
- Author:
- Jeffrey Cimmino, Matthew Kroenig, and Barry Pavel
- Publication Date:
- 06-2020
- Content Type:
- Policy Brief
- Institution:
- Atlantic Council
- Abstract:
- The COVID-19 pandemic is a strategic shock, and its almost immediate, damaging effects on the global economy constitute a secondary disruption to global order. Additional secondary strategic shocks (e.g., in the developing world) are looming. Together, these developments pose arguably the greatest threat to the global order since World War II. In the aftermath of that conflict, the United States and its allies established a rules-based international system that has guaranteed freedom, peace, and prosperity for decades. If the United States and its allies do not act effectively, the pandemic could upend this order. This issue brief considers the current state of the pandemic and how it has strained the global rules-based order over the past few months. First, it considers the origins of the novel coronavirus and how it spread around the world. Next, it examines how COVID-19 has exacerbated or created pressure points in the global order, highlights uncertainties ahead, and provides recommendations to the United States and its partners for shaping the post-COVID-19 world.
- Topic:
- Security, Defense Policy, NATO, Diplomacy, Politics, European Union, Economy, Business, Coronavirus, and COVID-19
- Political Geography:
- Russia, China, South Asia, Eurasia, India, Taiwan, Asia, North America, Korea, United States of America, and Indo-Pacific
25. Transforming the power sector in developing countries: Geopolitics, poverty, and climate change in Bangladesh
- Author:
- Robert F. Ichford
- Publication Date:
- 01-2020
- Content Type:
- Policy Brief
- Institution:
- Atlantic Council
- Abstract:
- Governments across South Asia face many challenges as they seek to improve the lives of the more than 1.8 billion people that live in the region. Increasing geopolitical competition—especially between and among China, Russia, and the United States—is one factor that is affecting progress. This “great power competition,” including over the South China Sea, is intertwined with regional rivalries (e.g., India and Pakistan, India and China, and the United States and Iran) and has important economic, military, technological, and environmental consequences. Energy is a key strategic sector in this competition as China pursues its expansive Belt and Road Initiative (BRI) infrastructure and trade vision, Russia uses arms sales and nuclear energy to expand its regional presence, and the United States confronts Iran and gears up its free and open Indo-Pacific Strategy and Asia EDGE (Enhancing Development and Growth through Energy) initiative. This issue brief considers the transformation of the electricity sector in Bangladesh. It is the fourth country analysis in the Atlantic Council’s “Transforming the Power Sector in Developing Countries” series. This issue brief applies to Bangladesh the analytical framework developed in the first report in the series, which presents general challenges and strategic priorities for developing countries in the context of their implementation of electric power policies and reforms following the 2015 Paris Agreement on climate change.
- Topic:
- Security, Climate Change, Energy Policy, Markets, Oil, Governance, Geopolitics, Gas, Renewable Energy, Fossil Fuels, and Transition
- Political Geography:
- Bangladesh, South Asia, and Asia
26. Democracy under siege: Advancing cooperation and common values in the Indo-Pacific
- Author:
- Kharis Templeman
- Publication Date:
- 01-2020
- Content Type:
- Policy Brief
- Institution:
- Atlantic Council
- Abstract:
- Over the past three decades, democracy has put down roots in many seemingly unlikely places across Asia, from Mongolia to Indonesia. At a time when democracy is in global retreat, the majority of these Asian regimes have demonstrated surprising resiliency, though many continue to suffer from glaring flaws: weak state capacity and accountability institutions, the absence of impartial rule of law, and uneven protection of political rights and civil liberties. This issue brief, “Democracy under Siege: Advancing Cooperation and Common Values in the Indo-Pacific,” by Dr. Kharis Templeman, examines challenges and opportunities for advancing cooperation and common values in the Indo-Pacific as the region faces an increasing challenge from China.
- Topic:
- Civil Society, Corruption, Diplomacy, International Organization, Politics, Reform, Elections, Democracy, Rule of Law, Norms, and Transition
- Political Geography:
- Japan, China, Taiwan, East Asia, Asia, Australia, Korea, and Indo-Pacific
27. Economic Priorities for a Sustainable Peace Agreement in Yemen
- Author:
- Zaid Ali Basha and Rafat Al-Akhali
- Publication Date:
- 06-2020
- Content Type:
- Policy Brief
- Institution:
- Sana'a Center For Strategic Studies
- Abstract:
- The sustainability of a peace agreement in Yemen depends on two critical economic issues. First, in a conflict that is largely over access to resources, the issues of distribution, control, and sharing of those resources can make or break peace. Therefore, these issues must be addressed head-on during negotiations. Second, where peace agreements lack provisions that create overall economic stability, warfare can resume during the fragile implementation period. The fears over the resumption of conflict after signing a peace agreement are substantiated by several historical events in Yemen, such as the failure of the GCC Initiative.
- Topic:
- Conflict Resolution, Economics, Natural Resources, Peacekeeping, Peace, and Economic Development
- Political Geography:
- Asia, Yemen, and West Asia
28. Developing Yemen’s Fishing Industry
- Publication Date:
- 04-2020
- Content Type:
- Policy Brief
- Institution:
- Sana'a Center For Strategic Studies
- Abstract:
- The fishing industry in Yemen faces many structural challenges that have limited its production and potential contribution to overall economic output. Development of the industry’s infrastructure, human capacity and regulation was already poor prior to the outbreak of the ongoing armed conflict in Yemen. Since the war began five years ago the fishing industry has faced increased challenges, including a significant drop in the level of production with the displacement of many fishermen and associated workforce; fish processing plants halting production; surging fuel costs; the decline of local purchasing power leading to a drop in the local demand for fish products; and the disempowerment of the Ministry of Fish Wealth (MFW), among other challenges.
- Topic:
- Economics, Oceans and Seas, Economic Development, and Fishing
- Political Geography:
- Asia, Yemen, and West Asia
29. Developing Human Capital
- Publication Date:
- 01-2020
- Content Type:
- Policy Brief
- Institution:
- Sana'a Center For Strategic Studies
- Abstract:
- This policy brief summarizes discussions regarding Yemen’s human capital at a “Rethinking Yemen’s Economy” workshop held in Amman, Jordan, on August 24-25, 2019. The workshop participants agreed that Yemen’s human capital accumulation has almost certainly regressed since the current conflict began. However, there is a dearth of reliable data to assess the scope and nature of this regression and thus how to best direct responses. There was also a consensus that many of the obstacles to improving Yemen’s human capital were present prior to the current conflict. In line with these findings, this brief recommends: countrywide population surveys; more funding of development projects over emergency humanitarian assistance; education reforms; and the targeting of sectors with high human capital returns. Crucially, policymakers should not wait for the end of the conflict to implement these recommendations. Investment in Yemen’s human capital now, specifically in geographic areas away from frontline fighting, should hasten the speed of the post-conflict economic recovery and lay the foundations for the sustainable development of the economy beyond the war.
- Topic:
- Economics, Human Capital, and Economic Development
- Political Geography:
- Asia, Yemen, and West Asia
30. Chinese Coercion in the South China Sea: Resolve and Costs
- Author:
- Ketian Zhang
- Publication Date:
- 01-2020
- Content Type:
- Policy Brief
- Institution:
- Belfer Center for Science and International Affairs, Harvard University
- Abstract:
- China’s coercive behavior in the post–Cold War period suggests three patterns. First, China uses coercion when it wants to establish a reputation for resolve. Second, China has been a cautious bully, resorting to coercion only infrequently. Third, when China perceives the “geopolitical backlash cost” of military coercion to be high, it chooses instead to use sanctions and grayzone coercion. (“Geopolitical backlash cost” refers here to the possibility that the target state will seek to balance against China, with the potential for U.S. military involvement.) When China perceives the geopolitical backlash cost to be low, it is more likely to use military coercion.
- Topic:
- Sovereignty, Power Politics, Geopolitics, and Economy
- Political Geography:
- China, Asia, and South China Sea