Also: the State Department’s report on this subject, the APEC and G20 summits, and the controversies over export subsidies and vaccine patents.
The weekly trade report with L.C.
Republicans on the Senate Foreign Relations Committee released a report calling for collaborating with allies against China. Last month Foreign Relations Committee Democrats released their own report, and this week, so did the State Department.
These come at a time when the White House is reportedly planning to ratchet up its actions against China in the remaining days of the Trump administration, with a view to limiting the options for the incoming president and set a legacy for the President of toughness on China.
Democrats’ report
Democrats on the Foreign Relations Committee, led by ranking Democrat Bob Menendez (D-NJ), released a separate report last month titled, “The Cost of Trump’s Foreign Policy: Damage and Consequences for U.S. and Global Security.” It was more directly critical of President Trump than the Republican report, where the criticisms were more implied than bluntly stated. The Democrats’ recommendations include investing more in diplomacy and the diplomatic corps, fixing ties with allies, promoting democracy globally, and improving domestic problems of racial discrimination and inequality. Yet the emphasis on working with allies means that the two reports are more in harmony than in conflict.
Republicans’ report
Released November 18th, the Republican report was titled “The US and Europe: A Concrete Agenda for Transatlantic Cooperation on China.” It urges closer ties with Europe to enable cooperation in confronting China and securing US and European shared values. To get there it recommends putting aside narrow points of conflict currently roiling relations.
There is an implied criticism of President Trump’s confrontational stand toward Europe and implied signal that Republicans are willing to work with a Biden administration in cooperating with allies against adversaries. Biden’s advisers recently released their own review of China relations that similarly called for close cooperation with allies.
The Trump administration has confronted China, sanctioned it, tariffed it, slapped restrictions on its activities in the US, but unlike what the Republican report recommends, it usually didn’t make a concerted effort to do so in collaboration with allies, toward whom it also often took a belligerent and punitive stance.
A joint US-UK presentation
Senate Foreign Relations Committee Chairman James Risch (R-ID) unveiled the report at a virtual press conference with participation from David McAllister, Chairman of the European Parliament Foreign Affairs Committee, and British Member of Parliament Tom Tugendhat, who chairs its Foreign Affairs Committee. “It is only by standing together that we defend freedom,” Tugendhat told the press.
The 123-page report covers the full array of issues posed by China and concludes that “Neither side of the Atlantic can respond to the challenges China poses alone.”
Beijing didn’t like the report. It is “another anti-China lie concocted by Cold War fossils from the State Department” who will be “swept into the garbage dump of history,” a Foreign Ministry spokesperson declared.
Here are the basic recommendations in the chapters on trade and technology:
Defending the International Trading System
- Advance shared objectives at the WTO…. The EU and Europe share two key priorities that can provide a starting point for reinvigorated collaboration on international trade issues. First, we must advocate for revocation of China’s developing country status…. Second, we should further advance efforts by the EU, Japan, and the US to strengthen existing WTO rules on industrial subsidies…. In addition, some parochial differences should be set aside so additional trade agreements can be advanced that help lower income countries develop faster.
- Broaden and deepen existing trilateral trade discussions among the US, the EU and the UK.
- Fix the reparable issues in our own trading relationship so we can focus on the real challenge: China. A prime example is the ongoing dispute between Boeing and Airbus.
- Undertake a more coordinated approach to export controls with respect to China.
- Consider working together to diversify some key supply chains away from China.
Shaping the Future of Technology
- Form a community of advanced democracies that promotes cooperation on critical technology.
- Initiate regulatory dialogues between partner agencies.
- Identify ways and implement incentives to encourage greater private sector and academic collaboration in niche technology areas that address disadvantages… in competing with China.
- Address issues with global patent enforcement through multilateral international intellectual property organizations.
- Work with advanced democracies such as Japan, Australia, India, Canada and New Zealand, on aligning science and technology agreements and explore further opportunities for plurilateral cooperation on technology development and associated regulation.
State Department report
Separately this week, the State Department Policy Planning Staff released its own 74-page report titled, “The Elements of the China Challenge.” The Diplomat characterized the paper as “a more nuanced diagnosis of the problem than usually found in Trump administration statements.” The White House has recently signaled that it intends to keep up the pressure on China during the remainder of President Trump’s time in office. The Global Times put this report in the context of the administration’s effort to box in successor administrations’ policy options on China. A White House National Security Council spokesperson said this explicitly, telling the press that “Unless Beijing reverses course and becomes a reasonable player on the global stage, future presidents will find it politically suicidal to reverse President Trump’s historic actions.”
A week filled with summits
There were several international summits this week. The pandemic — how to react cooperatively to it, how to fairly distribute vaccines, and how to plan for the subsequent economic recovery – dominated the conversations.
APEC
What grabbed the most attention at the virtual Asia Pacific Economic Cooperation (APEC) conference, which President Trump also participated in, was President Xi Jinping’s suggestion again that China would actively consider joining the CPTPP (the former TPP-11) as well as entering other trade agreements. Prime Minister Yoshihide Suga for his part indicated Japan will work to expand the CPTPP to new members.
Xi’s emphasis in his remarks was on the need for multilateralism. While most countries agree with the US that the portrayal is false and that China’s current practices are anti-market and trade-distorting, as long as the US engages in protectionism, Xi can claim the image of defender of the system.
The Japanese P.M. said that a “free and open Indo-Pacific will be the cornerstone for the prosperity of this region,” and promised that Tokyo, as next year’s APEC lead country, will promote the idea of a Free Trade Area of the Asia-Pacific (FTAAP).
G20
President Trump delivered pre-recorded remarks to the Group of Twenty (G20) Summit. He then left quickly, skipping an event devoted to the pandemic. The president’s remarks were focused on the environment, and he used the occasion to explain his opposition to the Paris Accord, which he said “was not designed to save the environment, it was designed to kill the American economy. I refuse to surrender millions of American jobs and send trillions of American dollars to the world’s worst polluters and environmental offenders, and that’s what would have happened.” He also touted the US record on environmental protection, and on increasing the energy supply through oil and gas production. “Every day we are proving we can protect our workers, create new jobs and safeguard the environment without imposing crippling mandates and one-sided international agreements on our citizens.”
International Working Group on Export Credits (IWGEC)
The US and Japan joined a group of countries in exiting (temporarily) the International Working Group on Export Credits. The IWGEC has eighteen members. The eleven countries that walked out and signed a joint complaint are the US, Japan, the EU, Australia, Brazil, Canada, New Zealand, Norway, South Korea, Switzerland, and Turkey. The seven who did not are China, India, Indonesia, Israel, Malaysia, Russia, and South Africa.
The IWGEC was set up to develop a new set of guidelines for government-supported export credits, over concern that some countries – primarily China – were engaging in excessive support for exports. The US Export-Import Bank has been encouraging the effort. It reported last year that China provided more than three times as much official export credits than the next largest provider, Italy.
A new trade war threat: Digital Service Taxes (DSTs)
New trade skirmishes may soon break out due to the standoff over digital services taxes. The OECD-sponsored quest for a deal on global guidelines won’t finish this year as hoped and is unlikely to conclude before next summer. In the meantime, DSTs are being implemented, with US companies the target. The US is ready to respond, and there is bipartisan support doing so. The prospect of new tariffs and retaliation are especially worrying US farmers.
At the WTO, a conflict over vaccine patents
The development of COVID-19 vaccines has spurred a developed/developing country clash at the WTO over patent protection. South Africa and India are leading a push to grant an intellectual property rights waiver of these vaccine patents – and other medicines and gear needed to fight the pandemic – in order to enable wide global manufacturing and distribution. China has given initial support, along with a number of other developing countries.
The US, the EU, and some other countries including Brazil are opposed to the proposal. A November 20th Wall Street Journal editorial writes that
Breakthroughs on vaccines and new treatments are finally offering the world a path to end the Covid-19 pandemic. They’re a tribute to private U.S. corporate innovation… America’s taxpayers have essentially paid for early access. Nonetheless, companies plan to share the fruits of their investment and innovation with the world’s poor…. Many companies are willing to license their IP at low or even no cost but want contractual agreements to ensure it is developed safely and not pilfered. But India and South Africa want to obtain this technology without paying for it and then use their generic-drug manufacturing base to produce, distribute and sell copycats worldwide. This is theft, not sharing…. It’s not clear developing countries even have the ability to manufacture large-scale, complex technologies like Moderna’s mRNA vaccine or Eli Lilly’s monoclonal antibody cocktail—let alone distribute them.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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