– Australian Prime Minister Scott Morrison hosts a virtual Quad leaders meeting on March 12th;
– Secretary of State Blinken and Defense Secretary Austin will cross Pacific to meet with their Japanese and South Korean counterparts prior to a high-level US-China meeting in Anchorage, Alaska;
– Japanese Prime Minister Yoshihide Suga will be the first foreign leader to meet in person with President Biden;
– The Quad (with especial help from India) is moving to address developing-sector vaccine needs, as are the WTO and WHO;
– The EU has settled tariff-rate quota disputes with the UK and US, but a contemplated EU border carbon tax could create a new trade battle.
The March 8-14, 2021 roundup of major trade developments, with L.C.
Mathias Cormann has won the race to become the next OECD secretary-general. Known as a “climate skeptic,” his victory was taken as a defeat for environmental groups focused on anthropogenic global warming. They greeted the outcome with alarmed pronouncements. Australian Prime Minister Scott Morrison, whose administration campaigned aggressively for Cormann, said the appointment was “recognition of Australia’s global agency and standing amongst fellow liberal democracies.”
Cormann’s candidacy was highly controversial for one reason: he has been skeptical of heavy measures to control carbon emissions, a position he promoted strongly as Australian finance minister and member of the conservative Liberal Party, which reversed the climate focus and carbon tax measures of previous Australian governments. Despite this, his OECD candidacy was also supported by the Australian Labour Party.
It was also understood that the US backed Cormann — votes weren’t made public — even though the Biden administration promotes strong “climate” action. The UK government – which also supports strong climate action – supported him, though the British Labour Party did not. (China had no role in the vote because it is not an OECD member. The OECD requires democracy and a market economy as preconditions for membership.)
Why Cormann?
Cormann, originally a Belgian (and thus having some regional appeal to some European countries), moved to Australia in 1996, and became active in the Liberal Party, long serving as finance minister. He is considered an effective diplomat who is knowledgeable about international economic issues that are of central concern to the OECD.
As the first Asian to hold the post, he is expected to encourage more engagement from the OECD’s Asian members and has said he will encourage more Asian countries to join. Current Asian members are Australia, Japan, New Zealand, and South Korea. Although the OECD itself doesn’t have any powers or direct authority over member countries and the secretary-general doesn’t control decisions by the organization, its leader can influence its priorities and agenda and use persuasion to push for agreement among members.
Among its activities, the OECD, which was set up to foster cooperation among developed democracies, has been tasked with hosting important negotiations including how to deal with steel excess capacity and how to set guidelines for international taxes, including digital services taxes. The OECD’s mission also includes helping members “design and implement effective policies to address environmental problems.”
Cormann played up his concern about climate change during his candidacy, but he has in the past denounced “extremist” climate goals and opposed carbon taxes, and his more recent statements haven’t assuaged climate activist organizations.
Japanese PM to Washington in April
President Biden has invited Prime Minister Yoshihide Suga to meet him in Washington – the first foreign leader to get an invitation to meet in person. He is expected to come in the first half of April. The White House announced on March 8th that the invitation was for Suga to come at the “earliest possible time.”
That meeting is expected to focus more on regional and global strategy and security than on bilateral or trade issues. Having recently reached a preliminary agreement on burden-sharing for US troops in Japan, there are no current bilateral conflicts to distract the two leaders from focusing on cooperation regarding their “shared challenges” (to use a phrase much heard this week regarding US diplomacy). Biden and Suga also met this week, virtually, when both participated in the first-ever Quad Summit, whose focus was also on regional security and cooperating to tackle shared challenges.
The Biden-Suga meeting will get some preparation this coming week when Secretary of State Antony Blinken and Defense Secretary Lloyd Austin travel to Tokyo on March 16-17 for a meeting of the US-Japan Security Consultative Committee – so-called 2+2 talks (State and Defense) – hosted by Foreign Minister Toshimitsu Motegi and Defense Minister Nobuo Kishi. The two US officials will then go to Seoul, March 17-18, for 2+2 talks with their Korean counterparts. From there, Blinken will go to Anchorage, while Austin will travel on to India.
During these visits and subsequently, will the US encourage Japan and South Korea (not to mention Taiwan) to develop their own nuclear weapons for deterrence of China and its North Korean proxy? That should be “Self-Defense 101” for these three countries.
US-China diplomacy
With the Biden administration stressing at every opportunity that the most significant challenges facing the country come from China, it has set its first high-level face-to-face encounter with Chinese officials on US soil in Alaska on March 18th. As National Security Adviser Jake Sullivan, briefing the press on the upcoming meeting, put it:
I don’t expect that… the phase one trade deal is going to be a major topic of conversation next week. This is our effort to communicate clearly to the Chinese government how the US intends to proceed at a strategic level… and what our concerns with their activities are – whether it’s on Hong Kong, or Xinjiang, or in the Taiwan Strait – or, frankly, the issues that we heard today from our Quad partners: their coercion of Australia, their harassment around the Senkaku Islands, their aggression on the border with India. So this will stay more in that zone than get into the details of questions around tariffs or export controls. But we will communicate that the US is going to take steps, in terms of what we do on technology, to ensure that our technology is not being used in ways that are inimical to our values or… security.
Appropriately, the meeting will come after US officials consult with regional allies, discouraging Chinese efforts to open space between the US and its allies.
First-ever Quad summit sets US focus on Indo-Pacific
Australian Prime Minister Scott Morrison hosted a virtual Quadrilateral Security Dialogue (Quad) leaders meeting (US, Japan, Australia, India), on March 12th. A wide range of topics were on the agenda, and the meeting resulted in one major announcement – a vaccine initiative.
The White House released the joint statement of Quad leaders, a fact sheet on what they decided, and a compilation of remarks by the four leaders.
The joint statement consisted of five points. The leaders said they “pledge to strengthen our cooperation on the defining challenges of our time.” These include how they will respond to “the economic and health impacts of COVID-19, combat climate change, and address shared challenges, including in cyber space, critical technologies, counter-terrorism, quality infrastructure investment, and humanitarian-assistance and disaster-relief as well as maritime domains.”
A commitment to coordinate tech standards
Briefing White House reporters after the Quad meeting, Sullivan declared, “we’ve taken the Quad to a new level.” Not to be outdone, Morrison said, “It is the Indo-Pacific that will now shape the destiny of our world in the 21st century.”
At this meeting they “launched a set of working groups, including an emerging technology group that will help set standards in key technologies like 5G and artificial intelligence, and another on cyber that will help our four countries meet this growing threat.” The working groups will deliver their results to the late-2021 summit. The leaders discussed an array of other “shared concerns” including challenges from China and dealing cooperatively with supply chain choke-points like those for semiconductors and critical minerals, to reduce dependence on China. Sullivan said they also “addressed key regional issues including freedom of navigation… in the South and East China Seas; the DPRK [North Korean] nuclear issue; and the coup and violent repression in Burma.” They “also spoke to the competition of models between autocracy and democracy.”
More vaccines
But most immediately – and in response to the urgent needs expressed by countries in the region – in a move aimed both at containing China’s influence and signaling that the Quad is serious about extending its own influence — the four leaders announced a vaccine program that showcases the complementary nature of the four Quad countries. As National Security Adviser Jake Sullivan told the press, “with respect to COVID-19, these four leaders made a massive joint commitment today: With Indian manufacturing, US technology, Japanese and American financing, and Australian logistics capability, the Quad committed to delivering up to one billion doses to ASEAN, the Indo-Pacific, and beyond by the end of 2022.”
The initiative may be partially aimed at defusing the conflict over the push for a WTO TRIPS waiver for vaccine patents – certainly, it should dampen India’s enthusiasm for it. But it also is intended to counter the “vaccine diplomacy” that China and Russia have launched as they offer, often for free, to supply vaccines to low-income countries. Most of those countries have also been looking to the COVAX international vaccine alliance (of which all Quad countries are members). The Quad has to be careful not to interfere with its efforts, eventually aimed at distributing 2 billion doses – or interfere with a new vaccine initiative WTO Director-General Ngozi Okonjo-Iweala is undertaking. One stumbling block is that the US has been limiting the export of vaccine ingredients, which has already reportedly created problems for COVAX and angered trading partners as well as the WHO and WTO.
Agriculture tariff-rate quotas resolved
The US and EU and the UK settled an issue that had caused some concern since Brexit – how the EU’s tariff-rate quotas for agricultural imports would be allocated now that the UK wasn’t part of the EU. Acting USTR Maria Pagan said, “Once implemented this agreement will provide market access certainty for US producers and exporters to the EU.” Twenty-one other WTO members that have substantial agricultural trade with the EU have engaged in similar TRQ negotiations, some of which are now completed, but those don’t affect the US deal.
Although the TRQ arrangement could run into difficulties, it gets another bilateral dispute out of the way, following last week’s suspension by the US, EU, and UK of the aircraft dispute tariffs and new momentum for an aircraft subsidies deal, as well as the US’s re-engagement with the OECD DST talks and new indications that the US and EU will work closely on WTO reform.
Border carbon tariff
Separately, the EU’s anticipated border carbon tariff may become a new point of tension. The EU is contemplating imposing a special duty – with revenue going to the EU budget – on imports from countries that don’t levy carbon taxes domestically. That way, their own companies that will probably be subject to the EU carbon tax won’t be disadvantaged vis-a-vis imports. Brussels is expected to propose the tax next month and make a decision by summer.
US Special Presidential Envoy for Climate John Kerry said in a March 12th Financial Times interview that the prospect “concerned” him because it has “serious implications for economies, and for relationships, and trade” and should therefore only be a “last resort.” The Biden administration is expected to propose a carbon tax – perhaps as part of its anticipated massive infrastructure bill – but may not be able to win congressional approval. That could leave US exporters facing new tariffs in Europe if the EU goes ahead with its border carbon tax.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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