Tag Archives: Japan

AT THE WTO – AMERICA STEPS BACK

“Atlas, tired of his burden, shrugged. The country that was indispensable to the creation of the international trading system has opted out of its leadership role, and the date and nature of its return to anything like its former position is completely uncertain.”

Alan Wm. Wolff
November 8, 2017

CONTEXT

Back in June, the Director General of the World Trade Organization, Roberto Azevêdo, announced that Alan Wolff would join the organization as one of the WTO’s four Deputy Directors General. On October 1, Mr. Wolff took up those new responsibilities.  A former Deputy USTR, former chairman of the National Foreign Trade Council, and one of the America’s – indeed the world’s – best known trade lawyers, it is hard to imagine anyone better prepared for a senior role at the WTO than Alan Wolff.

In Washington earlier this month, Mr. Wolff gave a lecture at American University on November 8 and a major speech at the CSIS on November 13. Today’s quote is from the first of these, the lecture at American University, and that is the focus of this entry. We have, however, slipped in a line or two from his presentation at CSIS as well.

Mr. Wolff sees the GATT–the agreement and the institution that grew up around it—and its successor, the World Trade Organization as a marvelous achievement, and one for which the United States deserves the lion’s share of the credit. Indeed, his lecture began with the statement that “Since the mid-1940s most of world commerce has been conducted within a Pax Americana.” He explained:

The United States did not choose [after World War II] to create a system like that which colonial powers had had in the prewar period of imperial preferences, although it could have done so. What the United States did was foster most-favored-nation treatment. This expression of enlightened self-interest was created in reaction to and flight from the severe, self-absorbed and self-destructive protectionist policies of the 1930s. There was to be benefit for all.

The rules-based liberal trading system was and is extraordinary, and has been a central factor in lifting hundreds of millions of the earth’s inhabitants above subsistence levels. It has been fundamentally beneficial for the American people as well.

At the outset, Mr. Wolff made it clear that he was not speaking for the WTO but rather sharing views formed over a lifetime of work in the vineyard of trade policy. Nevertheless, his lecture included, as one would have expected, references to the major WTO achievements of the last few years, including the agreements on Trade Facilitation, trade in information technology products, and disciplines on agricultural subsidies. It also included references to agenda items for next month’s WTO ministerial meeting in Buenos Aires, Argentina. We shall return to those in later entries.

Our focus today is on just two elements of Mr. Wolff’s lecture at American University: i) his lament at America’s withdrawal from the GATT-WTO leadership role it filled for 70 years and ii) his question, who will step in to fill the void? As for the first of these, here is the full paragraph with today’s featured quote, plus a few words from the next one.

It is easy to be critical of aspects of America’s stewardship of the world trading system, but to focus now on any past American shortfalls from its ideals is to miss the central challenge to the world economy here and now—the absence of American leadership in the word trading system. Atlas, tired of his burden, shrugged. The country that was indispensable to the creation of the international trading system has opted out of its leadership role, and the date and nature of its return to anything like its former position is completely uncertain.

The change in America policy was not the result of long-term planning. It was the almost incidental product of direct, as opposed to representative democracy.

That second paragraph concludes with a reference to Donald Trump becoming the 45th president of the United States.

COMMENT

We know of no one in the world of trade policy who gives a better speech than Alan Wolff and no one more worth listening to. And there is no denying that the Trump presidency has brought sharp, dramatic changes in American trade policy. The President’s withdrawal from the Trans-Pacific Partnership Agreement was the first of these. The American insistence on a renegotiation of NAFTA the second. But for us, the WTO doesn’t quite fit the pattern.

TPP was a new agreement, forged with American leadership. NAFTA, we would argue, was working well. But the WTO is a different story. At the very least, the debacle that was the 1999 Seattle Ministerial – the battle in Seattle – was a hint that maybe the bloom had gone off the rose of American leadership. Yes, two years later in Doha, Qatar, (and two months after 9-11) a new trade round was launched. What followed then was the long deadlock of the Doha Round negotiations, a deadlock that American leadership could not break.

These comments are in no way a criticism of the American officials involved in any of those efforts. The simple fact is that the world of the second decade of the 21st Century is very different from that of the late 1940s. The United States is no longer the world’s largest exporter; China is. And China is not far behind the U.S. as an importer, which means that, increasingly, countries look to China and the EU as the customers with whom they most need to curry favor. These changes in trading patterns were bound to have some effect on the GATT-WTO trading system. If anything, those effects were magnified by the creation of the World Trade Organization in 1995, which changed the character of the system’s core. Where once the center had been an agreement, now it is an organization.
All that said, and before turning to the question of where leadership in the WTO will come from, there were some critical points in Mr. Wolff’s speech at CSIS – points with which we strongly agree – and we need to mention them. For us, these three, in particular, stood out.

On the function of the WTO. “The chief value of the WTO system is providing essential stability without which business would have far less certainty. Without the WTO system in place, economic activity – both cross border and domestic – would be sharply reduced.”

On the need for change. “Going forward, the WTO … needs to change in a number of respects. … Without change the Organization is at risk of not remaining fully relevant.”

On leadership. The institution needs renewed leadership on the part of its member countries.

With respect to that last point, Mr. Wolff suggested at CSIS that “The United States should return to a leadership role, working with others for common objectives.” As we read it, the American University speech was somewhat more speculative, as he walked through the list of possible candidates. Among the smaller countries in the WTO, those who see themselves as friends of the system may have more to offer than one might expect.

Among the larger countries, Japan has other fish to fry. The EU is pre-occupied with Brexit, and “China seems hesitant to take up the mantle cast aside by the United States.” One needs to say just a bit more about both the EU and China. While Mr. Wolff’s comments on China struck us a straightforward assessment, his comments on the EU had in them the germ of a petition. “Perhaps it is unrealistic for Brussels to consider a change in priorities,” he said, “but the impact on the world economy of a rudderless WTO is potentially far greater than any of the possible BREXIT outcomes.”

Doubtless you will read the Wolff Washington speeches for yourself. The only point we would add on this question of leadership in the WTO is the parallel question, who, what country or countries, would be followed? Ultimately, we suspect Alan Wolff is right: the outlook for American leadership is brighter than that for any other country. We say that for the simple reason that, arguably, America has the best track record for relatively altruistic action on a global scale. But it is going to take time. For its part, America needs to work through the immediate issue of the NAFTA negotiations. As for the WTO’s other 163 members, they don’t seem ready to follow anyone. So first they need to be a little more concerned than they are now about the future of the WTO.

Sources & Links

Evaluating the System is a link to the Alan Wolff’s November 8 lecture at American University as posted on the website of the World Trade Organization. This was the source for today’s featured quote.

At CSIS takes you to the speech Mr. Wolff gave at the Center for Strategic and International Studies in Washington on November 13,  2017.

Originally published on November 28 as TTALK Quote No. 68 of 2017.

© 2017, Global Business Dialogue, Inc.

TPP: THE DA NANG ANNOUNCEMENT

“This is a remarkable achievement.”

Wendy Cutler
November 16, 2017

CONTEXT

Wendy Cutler is a Vice President of the Asia Society and the Managing Director of the Asia Society Policy Institute, the Society’s Washington Office. It was in November of 2015 that she left the government to take up those private sector/think tank roles. Before that, Ms. Cutler was a top USTR negotiator. She was the lead negotiator for KORUS, the U.S. free-trade agreement with South Korea and, as (Acting) U.S. Trade Representative, she was responsible for the TPP negotiations, especially the critical negotiations with Japan.

On Thursday,  November 16, Ms. Cutler was one of four panelists at GBD’s first public event on TPP since the United States withdrew from the agreement. She said a lot in short period of time.  Before turning to some of the highlights of Ms. Cutler’s presentation – including today’s featured quote – we would note these four dates in the life of TPP:

• September 22, 2008 – Then-U.S. Trade Representative Susan Schwab announces that the United States will join in the effort to negotiate a Trans-Pacific Partnership. Her statement is made at a meeting in New York with the trade ministers from Brunei, Chile, New Zealand, and Singapore or the P4.

• February 4, 2016 – Meeting in Auckland, New Zealand, representatives of the twelve countries that negotiated the Trans-Pacific Partnership Agreement (TPP) sign the agreement. The twelve countries are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam

• January 23, 2017 – President Trump announces America’s withdrawal from TPP.

• November 11, 2017 – Meeting in Da Nang, Vietnam, the TPP 11 – that is the above 12 minus the United States – issue this statement on a revised TPP:

“Ministers are pleased to announce that they have agreed on the core elements of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).” That’s the new name.

But now let’s return to some of what Ms. Cutler said last week. She told her audience she had eight points to make. A recording of her full presentation is available under the GBD Events tab of this website. If you listen to it, you will see that, here and there, we have ignored the numbers and shifted some observations from one segment to another.

On the Overall Effort.  Ms Cutler’s first point was the one quoted above. “This was a remarkable achievement.” As noted by another panelist, Atsushi Yamakoshi of Keidanren USA, America’s withdrawal from TPP came as a shock to the countries concerned and to the region. The first clear public effort to regroup and regain some momentum for TPP was the meeting in Chile back in March, a meeting which included not only the 11 TPP countries but also Korea and China. It was certainly not clear then, however, that the TPP 11 would be able to salvage the deal.

Japan’s Leadership. Ms. Cutler had high praise for all of the TPP countries but focused particularly on the leadership role of Japan. She herself had worked with Japan in the effort to bring them into the TPP negotiations, where they became an active participant. But being an active participant, she said, is far different from being a leader. And in the wake of the U.S. withdrawal, Japan was the leader. And she offered this illustration:

In TPP, remember, there were rules, and then there were market access commitments. These market access commitments are very detailed, and for Japan a lot of that was about what they were going to do on agriculture. … Japan had agreed in certain instances, particularly with respect to some very sensitive products, to what we called TPP-wide quotas. So, it was one number for all TPP 12.

The question, I am sure, that was under internal discussion [in Japan] was, do we keep that number for the TPP 11? Or do we somehow take a percentage out of that quota to reflect the U.S. exit from TPP? ….

I am sure that the Ministry of Agriculture probably wanted to reduce that quota. But if Japan was going to be the leader here, it needed to keep its market access commitments intact or else it would be a slippery slope. If Japan took some agricultural concessions off the table, others would follow. And that’s what leadership is about. And so, again, congratulations to Japan.

Suspended and Retained. The TPP 11 have agreed to suspend some 20 provisions of the original agreement, and naturally, as Ms. Cutler noted, the U.S. stakeholders who had argued for those provisions – provisions on things like the length of copyright protection and the treatment of certain pharmaceutical data – are unhappy that those elements have been suspended. But the suspensions are hardly the whole story. In Ms. Cutler’s words:

We need to remember everything that they kept in [the agreement]. .. That means labor, environment, the SOE rules [for state-owned enterprises], … the market access commitments, the digital commitments. And, in the areas where there were suspensions, they’re not suspending the whole chapter. … The TPP is largely intact, and all of the TPP 11 countries .. did a magnificent job in keeping almost all of the provisions intact.

More to Do—Canada. Brunei, Canada, Malaysia, and Vietnam all have outstanding issues, but the one Ms. Cutler highlighted was Canada—Canada and culture. When Canada joined the TPP 12, she said, it sought a broad carve out for cultural policies, but “that was not the outcome that was achieved” in the TPP agreement. Of course, in some respects the CPTPP is a new agreement, and Canada may again be seeking a broad carve out for culture. The weight she attached to that challenge was evident in her comment to the effect that “it may be necessary at some point to think about a TPP 10.”

Effect on RCEP. RCEP, the Regional Comprehensive Economic Partnership, is the other major trade agreement being negotiated in the Asia-Pacific Region. Anchored by the ten countries of ASEAN, the Association of Southeast Asian Nations, the negotiations also include Australia, China, Japan, India, Korea, and New Zealand. Ms. Cutler said that “This conclusion or near conclusion of the TPP Eleven, I think, provides important momentum to the RCEP negotiations.”

Without America – The Confidence Effect. Ms. Cutler’s point in this portion of her remarks was a serious one, but there was a sense of fun in her language. This is what she said:

The TPP 11 agreement, I think, really will build the confidence of TPP 11 members but also others in the region. … They must now feel like, ‘Wow. [We] can now do this without the United States.’ I would have loved to have been a fly on the wall for the negotiations. I’m thinking of all the different phases they probably went through. I would like to think there were times, particularly in the beginning, when they really missed the United States. But I also have to believe they probably had a stage in which – one night, a late-night meeting – where they were all kind of like laughing and thinking, ‘We don’t want to do this. Let’s take this off the table. The United States isn’t here.’ Kind of acting like kids with a bowl of candy.

But I think, by the end, while maybe they still miss us, I think they figured out a way to work together, to adjust to the new reality, and now to move forward.

TPP and China. Ms. Cutler was emphatic:

I think the TPP 11 agreement underscores that the TPP was never a U.S. conspiracy to contain China. If it had been, then TPP 11 would not have happened.”

A Personal Assessment. She said:

I get this question a lot: What does this mean to you personally?
My response is, I am so happy for the TPP 11. I think this deal is great for the region. I think it’s great for the multilateral trading system. I believe it’s a serious mistake for the U.S. to withdraw from TPP. And I think this is a decision we will come to regret.

On the New Name. As noted above, what used to be the Trans-Pacific Partnership or TPP, is now the Comprehensive Progressive Agreement for Trans-Pacific Partnership or CPTPP. Asked about the name in the question period, Ms. Cutler said:

It doesn’t roll of the tongue. I kind of like what Prime Minister Abe called it, and that was “Oceans 11.”

COMMENT

This is already a long entry, and, moreover, we know we will be returning time and again to TPP or CPTPP, and we strongly suspect we shall be sharing much more from last week’s event. So, we shall keep our comments to the one, absolutely de rigueur observation: Happy Thanksgiving!

SOURCES LINKS

Wendy Cutler Looks at TPP 11. This is a link to the audio recording of Ms. Cutler’s presentation at the GBD event TPP, AFTER APEC on November 16, 2017. This was the source for today’s featured quote (and most of the rest).

TPP, AFTER APEC is the page of the GBD website devoted to materials related to this event.

Official Statements takes you to the Ministerial Statement from the TPP 11 issued in Da Nang on November 11 as it appears on the website of the New Zealand Government.

Originally published on November 22 as TTALK Quote No. 66 of 217.

© 2017, Global Business Dialogue, Inc.

 

TPP: BETTER WITHOUT AMERICA

A CANADIAN ON TPP

“What was a blessing for Western Canada–Asian markets finally opening–could be even better without the presence of U.S. competitors.”

Carlo Dade
July 26, 2017  (publication date) 

CONTEXT

On January 23, 2017 — just three days after taking the oath of office — President Trump issued a memorandum that announced America’s withdrawal from the Trans-Pacific Partnership Agreement. While that action provoked a great deal of consternation around the world, it has not killed the TPP agreement. And not everyone is unhappy. Carlo Dade is among those who, to the contrary, see a world of advantages for Canada, especially Vancouver and environs, to a TPP that does not include the United States.

Mr. Dade is the Director of the Trade and Investment Centre at the Canada West Foundation. Today’s featured quote is from an article of his that was published in the Vancouver Sun on July 26. Yes, Canada’s ranchers and other agricultural producers should be able to gain market share in Asia at the expense of the U.S. if Canada and the other other ten TPP countries can conclude a revised TPP agreement. But that is only part of the potential Canadian advantage of a TPP without the U.S.

For Mr. Dade, there is more to the story. “It is not just beef and other commodity exporters that stand to gain,” he writes. “There are bigger opportunities on trade in services.” And, he adds, “For Vancouver, a TPP 11 is a chance to accelerate the movement of production, especially in services like high-tech, from the U.S.”

That is assuming, of course, that the remaining eleven can come to a final agreement on a new TPP, that is, one without the United States. Mr. Dade seems comfortable with that assumption. “All indications from media in TPP countries are that TPP 11 will indeed go ahead,” he writes.

COMMENT

Our guess — and it is only a guess — is that there is indeed a strong likelihood that TPP or some not too different successor to it will in fact come into being before too long. Whether the eleven will be able to wrap things up by November is another issue. It is their widely reported goal to have the deal essentially done by the time of the APEC Leaders’ meeting, which will be held in Da Nang, Vietnam, in early November.

Whether TPP is a done deal then or not, it should be an awfully interesting set of discussions. President Trump is planning to attend the Leaders’ meeting, though, obviously, not the side meetings of the TPP countries.

And, of course, one can only guess at how much intervening events will complicate things. Just as a taste, there was the July 28 announcement by Japan of a new “emergency tariff” on frozen imported beef. America is Japan’s largest supplier of that product and will be the hardest hit by that action. Even so, it has left countries that do not have a free-trade agreement with Japan — including Canada — envying countries like Australia that do have such an agreement. It has also given an added impetus to the TPP negotiations for those for whom they are still relevant.

***

Portland, Oregon, was not directly in the path of the full eclipse. But we were awfully close, which is to say that we did manage a brief twilight in the midst of an otherwise bright morning. That experience is over, but the metaphor lingers. With the signing of President Trump’s TPP withdrawal memorandum on January 23, we entered of a period of eclipse for America and TPP. U.S. policy makers and trade negotiators are now focused elsewhere, namely on the effort to revise and upgrade NAFTA.

But — thought for the day — maybe this fading of TPP is only a temporary eclipse. Certainly, if the other eleven manage to pull together enough to pull off a final deal, TPP will be an agreement that America will need to confront anew. If that happens, we will, with some enthusiasm, be dusting off an old adage: if you can’t beat ’em, join ’em.

SOURCES & LINKS

TPP – The Vancouver Advantage is a link to an op-ed in the Vancouver Sun by Carlo Dade of the Canada West Foundation. This was the source for today’s quote.

Beef Tariffs Up is a report from the Omaha Herald on Japan’s decision at the end of July to impose “emergency” tariffs of 50 percent on frozen beef, mainly from the United States.

Focused on Getting it Done is a Nikkei report of August 9 highlighting the commitment of Australia and other remaining TPP countries to get the deal done this year.

TPP Issues for Congress is a 2013 paper on TPP by the Congressional Research Service, which is quite useful. .

Withdrawal Announced takes you to the President Memorandum of January 23, 2017, which announces and explains America’s withdrawal from the Trans-Pacific Partnership Agreement.

Canada West is the website of the Canada West Foundation. The Foundation is based in Calgary, Alberta, the province’s largest city.

Originally published on August 21 as TTALK Quote No. 52 of 2017.

©2017 The Global Business Dialogue, Inc.