Three charts on: G20 countries’ stealth trade protectionism


Giovanni Di Lieto, Monash University and David Treisman, Monash University

It is clear that trade protectionism is alive and well in the G20, whose countries account for 78% of global trade. But this protectionism isn’t in the form of tariffs, which are duties placed on imports, making imported goods and services more expensive than they would be otherwise. Instead, trade protectionism is being pursued through “non-tariff barriers” such as import quotas, restrictive product standards, and subsidies for domestic goods and services.

This shows that while countries are reducing the obvious barriers to trade, like tariffs, they are still pursuing stealth forms of trade protectionism through non-tariff barriers.

Our research on trade protectionism in the services sector shows that the lower the barriers to trade, the greater company profits. Lower trade barriers create a larger market for Australian goods and services.

We also found that increased domestic regulation leads to higher profits as standards improve across the sector. For Australia this is very significant because the services sector employs four out of five Australians and accounts for 20% of Australia’s total exports.

Eliminating trade protectionism is also good for consumers, as it means a larger market for goods and services. This leads to lower prices and more choice of goods and services.

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The World Trade Organisation uses the term “trade restrictive activity” for measures like the imposition of a tariff. “Trade facilitation” refers to the simplification of export and import processes, making it easier to trade across countries. “Trade remedies” refers to actions taken by states against certain imports that are hurting domestic industries.

For example, in 2016 the Australian Anti-Dumping Commission slapped duties on Italian tomatoes that were being sold in Australia for less than they sold in Italy.

The data show that tariffs have been declining in the G20 over the past few years, while countries have been easing the processes of exporting and importing. However there have been a lot of trade remedies, as countries try to protect their domestic industries.

But looking at data on non-tariff barriers to trade tells a very different story.

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Until 2015 there was a huge increase in non-tariff measures, which then sharply declined. Since then not many measures have been removed. This shows that non-tariff barriers are currently the major mechanism for trade restrictions in the most developed economies.

As in the case of technical standards and regulations, non-tariff barriers can be used as a form of covert trade protectionism.

Technical standards and regulations can be quite legitimate and necessary for a range of reasons. They could take the form of a limit on what gases cars are allowed to emit, earthquake standards in regions prone to seismic activity, and even nutritional information on food and drinks.

But having too many different standards makes life difficult for companies that wish to access a market, as one product or service will need to comply with different standards in many countries.

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What has occurred in Australia echoes what has happened throughout the G20. There has been little activity recently in tariffs, but a significant use of non-tariff and technical barriers to trade.

This is a huge shift in Australia’s economic policy, which had until recently emphasised trade liberalisation as a recipe for growth.

According to the Australian Productivity Commission, trade restrictions directly raise the cost of both foreign and domestic goods and services, negatively impacting both Australian consumers and businesses.

Where to from here?

President Donald Trump’s trade agenda aims to distance the United States from the World Trade Organisation, which was setup to remove barriers to international trade.

In response, companies in the United States are now filing a huge number of anti-dumping cases against foreign goods and services.

At first glance, Australia appears to be off the hook when it comes to Trump’s hardline approach. We already have a bilateral trade agreement with the United States, not to mention a US$28 billion trade deficit with the US.

The ConversationBut the dangers of Trump’s trade doctrine could affect other countries and this disruption to global supply chains and financial security would eventually flow on to Australia.

Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University and David Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

As an historic nuclear weapons treaty is reached, G20 leaders miss the mark on North Korea



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In North Korea’s eyes, its nuclear program is the only guarantee of regime survival.
Reuters/KCNA

Joseph Camilleri, La Trobe University

Over the weekend, more than 120 countries adopted a treaty at a UN conference that prohibits the production, stockpiling, use or threatened use of nuclear weapons or other nuclear explosive devices. Australia was a notable absentee. So were the nine countries that possess nuclear weapons.

While the UN conference was taking a major step toward the elimination of nuclear weapons, the US and its allies – notably Japan, South Korea and Australia – were hoping to use the G20 summit in Hamburg to focus attention on the danger North Korea’s nuclear ambitions pose.

However, the declaration issued at the end of the G20 does not even mention the issue. We can now expect a UN Security Council resolution that condemns North Korea’s latest missile test and applies slightly tougher sanctions.

The glaring contradiction between the boycott of the nuclear ban negotiations and the preoccupation with the North Korean nuclear threat does not seem to have dawned on the US and its allies.

Kim’s misguided provocation and Trump’s futile bluster

In North Korea’s eyes, its nuclear program is the only guarantee of regime survival.

North Korea’s apparently successful intercontinental ballistic missile test last week is widely seen, and portrayed by the regime itself, as part of a relentless drive to develop a reliable long-range nuclear weapon capable of striking the US.

The US responded to the latest test by declaring the policy of “strategic patience” is now over. In a speech delivered in Poland prior to the G20, US President Donald Trump warned he is considering “some pretty severe things” in response to North Korea’s “very, very bad behaviour”.

Donald Trump’s pre-G20 speech in Warsaw.

Yet America’s options are limited. In the first five months of his presidency, Trump’s strategy was to cajole China into taking a more confrontational stance with North Korea. But there are limits to what China is able or prepared to do.

Trump then intimated the use of tougher sanctions against North Korea, possible financial or trade sanctions against China for failing to do more, and even the direct use of military force.

However, resorting to these coercive tools is unlikely to have the desired result. History tells us harsh economic sanctions are often counter-productive. They impoverish economies, strengthen dictatorships, and drive dissent underground.

As for a military strike on North Korea, it could well lead the regime’s leader, Kim Jong-un, to launch a devastating strike against America’s allies, – notably Japan and South Korea. This might include the use of chemical, biological and possibly nuclear weapons. Such a turn of events may even drag China into the conflict.

More promising is the policy of strategic caution advocated by Russian President Vladimir Putin and his Chinese counterpart Xi Jinping, which they reiterated in their separate meetings with Trump on the sidelines of the G20 summit.

Both Russia and China argue North Korea can be persuaded to halt nuclear and missile tests if, in return, the US and South Korea suspend their joint military exercises. This would be a prelude to the resumption of talks involving the US and North Korea that could lead to undertakings for all sides to refrain from the use of force or other aggressive measures.

This more pragmatic stance is close to the position of South Korean President Moon Jae-in, who argued in Hamburg that the focus should be kept on further sanctions and dialogue.

Why the treaty?

Nothing said at the G20 summit will resolve the North Korean crisis, for it is but a symptom of a deeper ailment.

The US and Russia, which between them account for 92% of the world’s nuclear weapons, are clearly intent on preserving and modernising their nuclear arsenals. They and other nuclear-armed countries have steadfastly resisted repeated calls for nuclear disarmament – even though Article 6 of the Nuclear Non-Proliferation Treaty requires them to do just that.

The nuclear weapons treaty that has just emerged is a direct response to the morally and legally culpable inaction of the nuclear-armed countries – something the G20 summit did not and could not do.

Put simply, the treaty is a comprehensive effort to bring the rule of law to bear on all aspects of the nuclear assault on the planet. It designates a nuclear-weapon-free world as “a global public good of the highest order”, on which depend:

… human survival, the environment, socioeconomic development, the global economy, food security and the health of current and future generations.

The treaty’s provisions are robust and thorough. In addition to prohibiting production, possession and deployment, each party to it undertakes never to test, transfer or receive from any recipient any nuclear weapons or explosive devices, and never to assist anyone or receive assistance from anyone to engage in any such activity.

Countries are further prohibited from ever allowing nuclear weapons or other nuclear explosive devices to be stationed, installed, deployed or tested in their territory, or anywhere under their jurisdiction or control.

But there’s more to the treaty than this. It specifically acknowledges the unacceptable suffering and harm caused to the victims by nuclear weapons, as well as of those affected by the testing of nuclear weapons, in particular indigenous peoples.

The treaty also reinforces the legal obligation of relevant countries to provide appropriate remedies to the victims of nuclear testing, and effective repair of environmental damage.

Those who have been busy drafting and redrafting the treaty have taken great care to make room at a future date for those countries that have not participated in the negotiations – in particular nuclear-armed countries and their allies. A well-crafted set of procedures allows for the progressive, transparent and carefully verified dismantling of their nuclear activities.

Nothing said at the G20 summit will resolve the North Korean crisis.
Reuters/Kay Nietfield

Australia’s negative role

The dramatic events of the last week raise troubling questions for the future direction of Australian foreign policy. Why is it that Australia has been absent from the negotiations leading up to the adoption of this treaty?

More than that, why has it done all in its power to thwart the initiative?

The reasons are not hard to find. There is within Australia a firmly entrenched but dangerous mindset that America’s military might, including its nuclear arsenal, underwrites Australia’s national security.

The Australian government’s opposition to the nuclear ban treaty is the logical consequence of its subservience to US strategic objectives and priorities. It is the extension of longstanding policies that have led Australia to entanglement in protracted, costly and unwinnable wars – in Korea, Vietnam, Afghanistan, Iraq and now Syria.

It is the result of Australia’s psychological insecurity, and the tendency of governments to try to demonstrate at every opportunity that we remain America’s most faithful ally.

Yet there are other options. Australia has much to gain from actively supporting efforts to prohibit and eliminate nuclear weapons, and from collaborating with like-minded countries and international organisations to develop an effective long-term nuclear disarmament agenda.

Such a process would create immense possibilities for easing tensions in the Asia-Pacific region – not just in the Korean peninsula, but in China-US and China-Japan relations, and in the South China Sea.

The ConversationPublic support for such a transition is greater than many would think. The nuclear ban treaty is the beginning, not the end.

Joseph Camilleri, Emeritus Professor of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

When Trump met Putin, and how the Russian won the day



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The much-anticipated meeting between Vladimir Putin and Donald Trump finally took place at the G20 summit in Hamburg.
Reuters/Carlos Barria

Kumuda Simpson, La Trobe University

It was the meeting we’ve all been waiting for. US President Donald Trump and Russian President Vladimir Putin met on Friday during the G20 meeting in Hamburg, Germany.

The key question was whether Trump or Putin would emerge as the stronger leader, with most backing Putin’s ability to manipulate and control the exchange. Trump’s lack of diplomatic or political experience, and his unwillingness to prepare for the encounter, inspired very little confidence that he would walk away with any serious concessions from Putin.

The meeting was scheduled to take half-an-hour. In fact it lasted more than two hours, and an indication the two leaders found a significant amount to talk about. The only other people present were US Secretary of State Rex Tillerson, Russian Foreign Minister Sergei Lavrov, and two interpreters. The little we know of what was actually discussed has come from statements Lavrov and Tillerson gave to the press following the meeting.

Russian interference in the US election

Tillerson said Trump pressed Putin over Russian interference in the 2016 election, but seemed to accept his denial that Russia did any such thing.

President Putin denied such involvement, as I think he has in the past.

Tillerson said the White House was not “dismissing the issue” but wanted to focus on “how do we secure a commitment” that there will not be interference in the future.

The big question going in to the meeting was whether or not Trump would raise the accusation with Putin. While he clearly did, the ease with which he appears to have accepted Putin’s protestations of innocence, and his reassurance that it won’t happen again, is remarkable.

According to journalists’ reports on Twitter, Lavrov had a slightly different spin on Trump’s reaction to the issue. He said:

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In light of Trump’s remarks in Poland the day before, when he called into doubt the reliability of US intelligence on the issue, this has further undermined the credibility of the US intelligence community. That Trump did this during a face-to-face meeting with Putin can only deepen the mistrust between the CIA and FBI have for the White House, and further damage morale.

It can also be read as a clear victory for Putin, who came away from the meeting without having to seriously address charges that Russia systematically engaged in what is a gross violation of the democratic integrity and sovereignty of another country.

Syria

There was a clear opportunity for Trump to use the meeting to pressure Putin over his continuing support for Syrian President Bashar al-Assad.

While any significant agreements over how to resolve one of the most complex conflicts in the region were highly unlikely, the two leaders did agree to support a ceasefire in an area of southwestern Syria. There were no other details, and Tillerson himself admitted that ceasefires in Syria have tended to fall apart very quickly.

While Russia and the US have a shared interest in fighting Islamic State in Syria, they disagree over the almost every other aspect of the conflict, particularly the future of Assad and the role of Iran.

Trump has recently ratcheted up to anti-Iranian rhetoric and it seems the Russian relationship with Iran could become a significant point of conflict between the US and Russia in the future.

No transcript of the meeting is available so it’s impossible to know exactly what was discussed here. But if Putin was not pressed on these points, it is certainly a missed opportunity.

Shared interests

While both Lavrov and Tillerson highlighted the shared interests the two countries have, neither Ukraine nor the ongoing nuclear crisis in North Korea could be counted among them.

North Korea’s testing of an intercontinental ballistic missile guaranteed that it would be high on the list of issues that would be discussed. Russia has contradicted the consensus among the other G20 leaders over the missile’s range, and blocked a resolution by the UN Security Council calling for “significant measures” in response to the test.

So, what do we make of this highly anticipated meeting?

With very little detail about what was actually discussed, and with the narrative firmly controlled by Lavrov, Trump would seem to have gained very little while conceding much.

Putin has come away with an implicit agreement to move on from the question of election meddling, without promising more than “dialgue” on Ukraine, no agreement on how to deal with North Korea, and no real movement on the horrific human tragedy in Syria.

The ConversationAlong with Tillerson’s affirmation that the two leaders shared “a clear positive chemistry”, it’s hard not to recall George W. Bush’s claim to have seen into Putin’s soul, and conclude that Putin has once again expertly played a US president.

Kumuda Simpson, Lecturer in International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

The G20’s economic leadership deficit


Adam Triggs, Australian National University

Few have heard of the Baltic Dry Index. It measures the demand for bulk shipping carriers, used for international trade. It usually attracts little attention. But nine years ago this index had the undivided attention of the 20 most powerful leaders in the world.

It was when the global financial system was on a precipice. Stock markets were crashing. Credit markets were freezing. Rolling failures across financial institutions were shattering confidence. Unable to wait for monthly trade data, the Baltic Dry Index showed in real-time what many leaders feared: global trade and commerce were grinding to a halt.

Leaders faced the real prospect of another Great Depression. But they were determined not to make the mistakes of the past. They resisted a return to protectionism. They slashed interest rates and buttressed the International Monetary Fund and development banks. Over the next three years, they implemented US$5 trillion of co-ordinated fiscal stimulus, the largest in history.

That leadership is needed again today. The risks leaders face at the latest G20 meeting in Hamburg, Germany, might not be as serious as those the leaders who met in Washington faced back in 2008. But the risks are present, and leaders are disengaging with the G20’s ever-expanding agenda. They are more likely to use the G20 for cheap political point scoring than for advancing co-operation on critical global challenges.

Australia can play a role in helping the G20 to deliver this leadership.

Economic challenges

Protectionist measures are on the rise. Protectionist rhetoric is rising faster. The World Trade Organisation shows that the stock of trade-restrictive measures is growing, up 8.5% in the 12 months to May 2017 alone.

The G20’s growth agenda from 2014 is in tatters. The G20 committed to make G20 GDP 2.1% bigger by 2018. Instead, the International Monetary Fund forecasts it to fall short by almost 6%.

A strong, effective G20 is manifestly in the interests of the global community, but particularly of Australia. Three-quarters of our merchandise trade is with G20 countries. Our banks rely on them for wholesale funding. Our tourism sector relies on them for two-thirds of our tourists. Our universities rely on them for the vast majority of their students.

Critically, the G20 is an opportunity for Australia to have a say in how global governance will be shaped in the years ahead and to be a regional champion for Asia.

Through in-depth interviews with over 40 central bank governors, ministers and officials from G20 countries, my research suggests there are practical things the G20 could do to increase its relevance. Importantly, participants see Australia as a developed economy, closely integrated in Asia and which promotes the values of the open, rules-based international order. This makes Australia well placed to push for pragmatic changes to improve the G20 process, particularly having hosted the 2014 meeting.

My interviewees warned that the G20’s agenda is too heavily dictated by the host country. In 2011, when France hosted the meeting, President Nicolas Sarkozy asked UK Prime Minister David Cameron to produce a report on reforming global governance. This instantly elevated the issue and saw substantial involvement from other leaders. Australia should push for allowing more leaders to champion the issues important to them, rather than leaving it all to the host country.

Participants similarly suggested that the G20’s peer-review process is too weak. This is the process through which countries review and give advice on each other’s policies. It’s critical to the G20’s ability to generate peer pressure, which is how a non-binding forum influences policies.

But participants saw this process as being a “tick and flick” exercise, isolated to junior officials in G20 working groups. Australia should advocate to change this, elevating the peer-review process to the level of ministers, governors and leaders. This will allow the people who have political capital to raise substantive points with one another.

For the G20 to demonstrate global leadership, participants suggest that it needs a genuine agenda for growth, with a stronger focus on making growth more inclusive. The OECD has some suggestions for this, such as investment in infrastructure, education and microeconomic reforms that lift workforce participation and create new opportunities for quality investment. The IMF shows that GDP gains can be 25% larger if structural reforms like this are co-ordinated between countries.

Participants also wanted progress on trade but warned that reaching agreement has been difficult. Recent research suggests the G20 should seek to promote consistency between the plethora of global, regional and bilateral trade agreements and develop a framework for how they can be scaled up into a global, WTO-led agreement.

The research shows that countries benefit most when trade liberalisation happens globally, but the “noodle bowl” of existing trade agreements is a nightmare for exporters to navigate. Australia, as a strong advocate for free trade, is well placed to show leadership on this issue.

Outcomes on trade are also vital for inclusive growth. Research shows that the poor can afford 63% more goods and services because of free trade, more than twice the benefit that flows to the rich.

But talk is cheap. It’s easy to commit to reforms but only half of G20 commitments are being implemented.
Australia should push for a serious accountability framework to monitor implementation and identify the countries that fall short.

The ConversationA weakening of the G20 is a weakening of Australia’s international influence. Few countries have a greater incentive to put solutions on the table.

Adam Triggs, Research fellow, Australian National University

This article was originally published on The Conversation. Read the original article.

Australia and the G20


The link below is to an article that comments on the G20 meeting in Australia and the current situation for Australia in the G20.

For more visit:
http://www.smh.com.au/business/theres-plenty-at-stake-for-australia-when-the-g20-gathers-here-20140221-337j1.html