..


The Conversation

  • Written by Giovanni Di Lieto, Lecturer of international trade law, Monash Business School, Monash University
Australia has to prepare for life after the World Trade Organisation

The Trump administration’s economic policy is rapidly breaking down the World Trade Organisation (WTO) system and shattering the rules-based international order. On top of imposing tariffs, the United States is blocking the appointment of new judges to the body that interprets and enforces WTO rules, decisions and agreements.

If this continues, the WTO will virtually cease to function by the end of 2019.

This will cause a gradual breakdown of the multilateral trading system and lead to a new international economic order that is no longer anchored in liberal democratic values, nor fully constrained by the rule of law.

Read more: America's allies will bear the brunt of Trump's trade protectionism

Australia must plan for a change in the globalised economy that has underpinned our 27 years without a recession.

In other words, Australia urgently needs a plan B should Donald Trump’s trade agenda lead to further protectionism.

This could include a so-called “border adjustment tax” – a flat tax on imports with a corresponding rebate on exports – or more emphasis on trade with noncompetitive economies such as India and Indonesia.

Breaking the World Trade Organisation

The US blocking of new judges to the WTO’s Appellate Body has caused a large backlog of disputes.

The Appellate Body is an international trade court of appeal typically composed of seven judges. They have the final say on the interpretation and enforcement of WTO rules, decisions and agreements.

The WTO is a member-driven, consensus-based organisation. Thus, the appointment of new Appellate Body judges can only occur “if no Member, present at the meeting when the decision is taken, formally objects”.

This is not exactly an equal veto power for all WTO members from mighty China to tiny Vanuatu. The larger economies can easily sway the minnows. The reverse is not true.

In practice, it takes the opposition of only one very powerful country to block any WTO process.

Read more: Why Trump's tariffs will have little impact on Australia and a trade war is unlikely

From October 2018 there will be only three Appellate Body judges left, the minimum required to form a valid dispute settlement panel. Crucially, two more judges will conclude their quadrennial term in office on December 10 2019, thus reducing the Appellate Body to only one member.

This effectively means the WTO rules can no longer be implemented and enforced. A paralysed Appellate Body is the death knell for the multilateral trading system.

This is what Trump really meant when he said that “trade wars are good and easy to win”. They are indeed for countries allowed to act unilaterally without the constraints of enforceable multilateral rules.

An anti-globalisation strategy

Diminishing the Appellate Body is just the latest in the smash-and-grab tactics used by the Trump administration to counter globalisation.

It appears to be a two-pronged plan. First, break the WTO system. Second, implement sweeping tax changes to rebalance America’s trade accounts, using measures prohibited by the WTO.

The WTO Appellate Body crisis is a canary in the coalmine. Australia must act without delay to limit any damage from disrupted trade flows and to chase opportunistic gains from trade diversions in emerging regional value chains.

For example, Australian beef producers will be much more competitive in exporting to China as their American competitors have to grapple with a 25% tariff on their beef.

On the other side, Japan recently struck a deal with the European Union to drop tariffs on food imports in exchange for concessions on car exports hit by the US-China trade war. Australian food exporters will face stiffer competition from the EU in the Japanese market.

Life after the WTO

With the United States planning adjusting border taxes post-WTO, Australia must consider similar measures to keep the economy stable and competitive.

Australia should refocus diplomatic efforts towards bilateral ties within the Indo-Pacific region rather than the developed economies that are further away.

A new generation of bilateral trade and investment partnerships is better suited than dwindling WTO instruments to maximise Australia’s economic and security outcomes in a less-than-liberal international order.

Read more: Rising imports make the case for Trump's border adjustment tax in Australia

Strengthening Australia’s bilateral ties in the Indo-Pacific is especially necessary in a securitised trade environment that is pivoting to shorter yet knottier supply chains within regional clusters.

We can already spot the initial signs that Australian policymakers are repositioning to navigate life after the WTO. During recent discussions in Buenos Aires between Group of 20 finance ministers, Treasurer Scott Morrison called for a revamp of the WTO system, as it “failed to deal with long-standing issues” and was “built for a different time”.

Morrison didn’t spell out what changes he thought were needed to ensure Australia is better off in the next trading system. This is a debate we need to have sooner rather than later.

Authors: Giovanni Di Lieto, Lecturer of international trade law, Monash Business School, Monash University

Read more http://theconversation.com/australia-has-to-prepare-for-life-after-the-world-trade-organisation-100522

Politics

Scott Morrison - Breaking Ground on Western Sydney Airport

Construction on Western Sydney Airport will begin today – boosting jobs, creating much-needed infrastructure and strengthening the economy.   Prime Minister Scott Morrison said the Western Sydney ...

Scott Morrison - More choice for Australian families

Australian families will have choice and equity in education as the Morrison Government guarantees funding to the non-government school sector. The Australian Government has accepted all the recom...

Dutton - Labor/Green witch-hunt comes up empty

Despite Labor’s best efforts in hyping up the so-called “au pair” Senate inquiry, the farcical and shambolic witch-hunt has come up with nothing except findings that mirror the Labor Party’s initial...

Business News

Achieving the Perfect Balance of SEO and Creative Content is just a Few Steps Away

If you want an appropriate description of today’s online marketing world, in the search engine optimization kingdom, it may somewhat fit along the lines -- content is the king. Basically, it means tha...

Get Your Hands on The Perfect Shipping Container Today

A shipping container is such a blessing in disguise! It comes in handy for both temporary as well as long term storage, or say mobile offices, or even as temporary building options. They are extensive...

Is a flexible workforce the way of the future?

In short, “Yes,” says Joint Managing Director of Citrus Group, Paul Smith. By nature, working in a contact centre “isn’t the easiest job in the world,” says Paul. Allowing staff to work flexible hou...

Travel

Holiday Hacks: How to beat the travel companies at their own game

HACK YOUR WAY TO A CHEAPER HOLIDAY How to beat the travel companies at their own game and save money during the next school holidays   19 September 2018: As any parent who’s tried to book a holid...

Experience European Glamour with Ecruising

In May 2019, Ecruising is inviting travellers on an exciting itinerary that includes not one, but two, quintessential French Riviera events – the high-octane Monaco Grand Prix and the iconic Canne...

Factors to Consider When Buying a Campervan

You’ve been waiting to buy a Winnebago campervan and now it’s your chance. You’ve saved up and you’re ready to start living the road trip lifestyle. You’re in for a great time and adventure. Of cour...

You might also like