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Opinion | China-led RCEP provides starting point for reducing tensions and building new global trade rules
- World commerce badly needs a confidence boost amid increasing protectionism and deteriorating relations between trade partners
- Bilateral approaches are insufficient with high trade tensions while multilateral institutions like the WTO struggle to adapt to new challenges
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Trade policy shocks during the Covid-19 outbreak are more serious than before. China has imposed anti-dumping and countervailing duties on Australian barley, and the United States has tightened export controls on China.
There is no winner in trade tensions. Trade tensions could negatively affect exporting countries and, in the long term, damage confidence in trading with importing countries. Trade tensions are leading to increased protectionism and fractured state relations, bringing serious uncertainties in commerce.
There is an urgent need for new developments, specifically on rules and dispute resolution, because of the breakdown of the WTO dispute settlement mechanism and new trade tensions brought by Covid-19.
How can we address trade tensions? There are three possible approaches: bilateral, regional and multilateral. Bilateral agreements cannot be relied on to fully address trade tensions. Third-party adjudication under bilateral trade agreements is rare given asymmetries in parties’ negotiating positions.
High-level bilateral consultations are less likely where trade tensions are high, as with the current Australia-China trade relationship. Bilateral negotiations also typically lead only to ad hoc solutions given the sharp differences in the two sides’ positions.
For example, while the US-China phase-one agreement was concluded in January after nearly two years of trade war, the fate of the agreement remains unknown. US President Donald Trump has said he might “cut off the whole relationship” with China. Owing to deep divisions between China and the United States, the agreement itself does not cover deep structural issues such as state-owned enterprises, market competition and national security.
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