The many ways Australia isn’t as pro-trade as we claim


Gabriele Gratton, UNSW

Chinese President Xi Jinping’s speech at the annual Boao Forum this week caused sighs of relief after a month of mounting threats of tariff escalations between China and the US. Instead, Xi pledged a “new phase of opening up”, including cutting tariffs on car imports.




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US President Donald Trump’s vision of the global economy as a zero-sum game is at odds with Australia’s experience: the mining and education booms that benefited millions of Australians were fuelled by the Chinese economic miracle of the last three decades.

History too is on the pro-trade side: when trade wars waged on both coasts of the Atlantic in the 1930s, claims of unfair competition became nationalist rhetoric, tariffs became guns, and the economic tragedy of a trade war turned into the real immense tragedy of the second world war.

With such powerful images in mind, we are rightly proud to defend the merits of a well-regulated free-trade world. But perhaps we may be too generous with ourselves. As it turns out, Australia is not innocent when it comes to anti-trade sentiments.

On July 1, 2018, the Australian government will extend GST to low value direct imports of physical goods. The mode of collection, designed to limit enforcement costs, relies on the voluntary participation of foreign retailers, with Treasury (perhaps optimistically) estimating compliance rates as low as 50%.

But border controls on parcels will remain a heavy burden on the budget. To cover the losses, the government is likely to impose a A$5-to-A$10 per-parcel levy on international retailers, in addition to GST. This is a new barrier to trade.

Many more barriers go unnoticed. Of course, the fragile and unique ecosystem of the continent needs to be protected, so we naturally impose some barriers to the importation of biologically sensitive material. The immediate economic costs for Australian consumers are large, albeit difficult to estimate precisely, but probably necessary to protect our environment from bio-threats to seeds, meat – and books.

Yes: books. Thanks to restrictions on the parallel importation of books, Australian publishers (including local representatives of multinational publishers) sell books written, published, and printed outside Australia, at much higher prices (in many cases, more than 50%) than what is charged for essentially identical goods just outside our customs.




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In 2009, the Productivity Commission concluded that this policy is a net transfer from Australian consumers to publishers and authors around the world. The Commission forgot to add that books feed knowledge, and a knowledge economy is critical to the future of our children. That is, if more expensive food damages consumers now, more expensive books damage the present as well as the future of the country. Despite the report, the policy stands. As a nation we chose to protect our publishers instead of our children’s future.

Our recent pro-trade score is not much better.

In 2016, the Anti-Dumping Commission found canned tomatoes exporters La Doria and Feger guilty of dumping – that is, selling products for less than they sell for in their own country. The government responded by imposing dumping duties up to 8.4% on all Italian tomatoes. Such anti-dumping retaliations are perfectly legal within the WTO framework, but often cover protectionist policies.

According to a 2017 WTO report, Australia was responsible for almost a third of all such retaliations among the G20 countries in 2016, second only to the US. Not bad for a nation that sees itself at the forefront of the fight for free trade.

To be fair, Australia has contributed to world peace with many unilateral free-trade decisions in the past. Car import tariffs are now a small fraction of what they were 30 years ago and may well be scrapped completely this year. But if we want to contribute to maintain this peace in the future, we may need more than the pride of feeling on the right side of history.

The ConversationThe government should stop flirting with Trump’s new anti-trade wave, and not be content with being excluded from Trump’s steel and aluminium tariffs. As a pro-trade nation, Australia should speak loud and clear.

Gabriele Gratton, Senior Lecturer in Economics, UNSW

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

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Shorten’s plan to triple anti-dumping penalties misunderstands the law


Weihuan Zhou, UNSW

Bill Shorten’s proposal to triple anti-dumping penalties demonstrates a misunderstanding of dumping and its impact on the economy. It also misunderstands when anti-dumping measures may be lawfully applied and to what extent.

Shorten’s proposal is purportedly to prevent Australia from becoming a “dumping ground for cheap foreign goods sent here by trade cheats”. The Opposition Leader says Labor is a strong believer in trade, but it should be conducted on a “level playing field”. He also wants to give the Anti-Dumping Commission 30 new staff and new responsibilities.




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There are no existing penalties in the World Trade Organisation (WTO) anti-dumping regime, or in Australia’s anti-dumping regime – that would be in breach of WTO rules. Australia’s current regime involves the use of anti-dumping measures to counteract injury caused by dumped imports to domestic industries. These typically take the form of import tariffs.

Anti-dumping measures like duties are not “penalties” as such, but simply taxes in the form of a customs duty to remove the injury caused by dumping.

In recent years, the use of anti-dumping measures has been on the rise predominantly to protect the steel industry in Australia.

Current dumping rules

“Dumping” is when an exporter exports goods to another country at an export price less than what it sells the same like goods in its own country. Under WTO rules, this is neither illegal nor unlawful.

It is a perfectly legitimate commercial practice. In fact, in 2016 the Productivity Commission found there was no compelling economic rationale for a country like Australia to act against dumping.

Rather than prohibiting the practice of dumping, WTO anti-dumping rules only provide a remedy where the dumping causes material injury to a domestic industry in the country of import, for example reduced revenues and profits. The remedy is the imposition of dumping duties, or customs duties.

This should be equal to or less than the margin of dumping – the extent to which an exporter’s export price is lower than its home market price.

It’s not clear how the “triple penalties” proposed by Shorten could be imposed in line with the WTO rules.




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Increasing penalties could hurt the economy

Mr Shorten’s anti-dumping penalties would have several effects – including to increase prices of imported goods and inputs for Australian produced goods. This price rise would be passed on to Australian companies and consumers. For example, this would increase the cost of steel for construction industries.

Shorten’s policy would benefit a small group of import-competing industries, such as those producing steel and A4 copy paper, including companies that are wholly owned by foreign companies. But such policy completely ignores the interest of Australian manufacturers using imported materials, their employees or consumers.

Increased dumping penalties could also stifle competition, increasing prices. This could also increase unemployment, as the imposition of the penalties would make the cost of business uneconomical.




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Consumers lose out to Australia’s protectionist anti-dumping laws


Shorten’s policy on dumping seems misguided and ill-informed and can only operate to Australia’s detriment. These observations are consistent with the findings of the Productivity Commission that Australia’s anti-dumping system has become increasingly more protectionist and damaging.

In the interests of fair trade, similar penalties would need to apply to Australian companies engaged in dumping, and to both export and domestic sales to ensure a “level playing field”.

More fundamentally, as the Productivity Commission has observed, “fairness” does not provide a justification for anti-dumping measures which fail to consider the impact of such measures on the community as a whole.

What’s more, Shorten’s “triple penalty” could drag Australia into the ongoing trade conflict and harm Australian consumers and industries using imports from China. If the “triple penalty” provokes China’s retaliation, that will hurt Australian goods and services exporters.

The ConversationThis article was co-authored by Andrew Percival, Principal at Percival Legal.

Weihuan Zhou, Senior Lecturer and member of China International Business and Economic Law (CIBEL) Initiative, Faculty of Law, UNSW Sydney, UNSW

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

Move over Canada and EU, Australia is best placed to benefit in the US-China trade tug-of-war


Giovanni Di Lieto, Monash University

Australian firms are in a sweet spot between the bickering United States and China, where they can sell more and buy more cheaply because of weaker competition in both markets. Essentially, the mutual tariffs are a double blessing for Australia.

The latest escalation of the ongoing tariff war promises to impact on international trade exchanges to the tune of A$130 billion per year across a broad range of economic sectors, including metals, drugs, motor vehicles, electronic components, industrial machinery and foods.

Australia is one of the best placed countries in the world to reap the gains of the likely trade diversions. For example, Australian beef producers will be much more competitive in exporting to China as their American competitors have to grapple with the 25% tariff on their beef. On the other side, as China raises tariffs on soybeans, Australia could buy this product more cheaply from US farmers keen to find new distribution channels.

And the same goes for all other products appearing in the US and Chinese hit lists on both the export and import sides of markets.




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Australia’s main competitors for this double market grab are just a handful of highly developed economies with sizeable commercial ties with both the US and China. These include Canada, the EU, Japan and South Korea.

But in comparison with these trading competitors, Australia has a natural advantage due to the ease of access to maritime routes right across the Asia Pacific region.

While Europe is also in between the American and Asian continents, its overland trading routes are far less developed than the maritime ones and are also clogged by hostile countries such as Russia, Turkey, Iran, Pakistan and India.

Canada is also at a disadvantage to Australia because of its more embedded economy and supply chains with the US. The challenging renegotiation of the North America Free Trade Agreement with the US and Mexico could also stunt Canada’s range of trading action.

Similarly across the Pacific, Japan and South Korea share Canada’s tricky position as they are too close to their powerful neighbour, in this case China. Not to mention that South Korea is also under intense geopolitical pressure from President Trump to renegotiate its advantageous bilateral free trade agreement with the US.

Australia is sitting pretty

Australia doesn’t pose a direct strategic threat to either China or the US, as its economy and military power is not too big. And it’s not so small that it can be easily trumped. Also, its location is not too close, yet not too far from any of the major contenders for primacy in the Asia Pacific region.

Australia has skin in the game but not to an indispensable degree. More important still, Australia has solid and mutually beneficial bilateral free trade agreements with both China and the US, which gives more predictability to the country’s trade and investment flows.

In fact, as the Australian Trade minister, Steve Ciobo remarked, Australia is relatively safe from any retaliatory action from the Trump administration thanks to a negative trade balance with the US.

On top of that, in terms of foreign direct investment Australia has ample room and need to diversify its over-reliance on US money. Official data show the US tops the list of foreign investment in Australia with 27% of total value by country, which is a level 10 times bigger than Chinese investments. On the other hand, Australian capital mostly flows out to the US (28% of total value) and not very much to China (only 4%).




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It’s handy for Australia that the US Trade Representative has flagged new restrictions on Chinese investment in the US to
contain “China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as Made in China 2025”. This means more investment spillovers are likely to flow between China and Australia with more favourable terms than ever.

Deeper investment ties with China will make an increasing negative trade balance with Australia more acceptable to China over the long term. Also this dynamic places Australia’s economy in pole position to take advantage of the improving quality of Chinese financial markets. This is evident in the ongoing rebalance of the Chinese economy, as it moves towards more reliance on growing consumer demand and away from inefficient, debt-fuelled investment.

Overall we are in the presence of a paradox. What in ordinary times used to be Australia’s vulnerabilities may instead prove its strategic strength in the context of a trade tug-of-war between the US and China.

As long as the trade war does not escalate to a full-blown military conflict, on the face of it Australia can still afford to sit on the commercial fence. With this pragmatic economic approach, cynics may well define Australia as a vulture country.

The ConversationBut to be realistic, the US-China trade war gives Australia the unprecedented chance to expand its economic footprint in the geopolitical agendas of both global superpowers. At such uncertain times, even more than pure economic profit, this strategic improvement will be the sweetest fruit for the lucky country.

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

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

Why China is a leader in intellectual property (and what the US has to do with it)


Alice de Jonge, Monash University

United States President Donald Trump is not the first to complain about intellectual property (IP) theft by Chinese companies but ironically it was US companies’ use of China’s resources that led to the development of its powerhouse of patents.

In the late 1980s and throughout the 1990s, western firms like Apple and Intel made large profits by investing in China to take advantage of the cheap labour, often at terrific human cost. As China’s economy grew, and the population became wealthier, western firms were then able to profit by selling their products back to the wealthier children of the same labour force which made them.

The Chinese government saw this happening, and wanted western firms benefiting from the Chinese market to give something back. It established a system of approving foreign investments on the condition the businesses involved agreed to partner with local firms and transfer knowledge and skills to the local Chinese market.




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In December 2001 when China joined the WTO it entered into the Agreement on Trade-Related Intellectual Property Rights to bring its IP laws up to a minimum international level. At the same time, the government was keen to transition from being a manufacturing-based economy to an innovation-based economy. This large step forward (as opposed to great leap) would be fuelled by expanding China’s domestically owned intellectual property.

One of China’s more controversial growth tactics has been to focus on fostering IP innovation within China. For example, the government preferences procurement of high-technology products whose IP is owned or registered in China.

This has been called a strategic attempt to commercialise non-Chinese ideas in China, and as a trade barrier potentially contravening China’s WTO commitments, including those under the Trade-Related Intellectual Property Rights agreement.

In 2010 the Obama administration filed a complaint with the WTO over China’s use of its innovation policies in the wind power industry. There’s been other complaints lodged relating to Chinese IP laws, one notably in 2007 argued that China has failed to enforce IP law on pirated products, even when they had been identified by victims and/or the Chinese authorities.

Since the late 1990s, China has been steadily improving the quality of its IP protection and the standard of its IP law enforcement. Many of its preferential policies favouring Chinese IP development have been wound back so as not to discriminate against foreign IP; or at least not so obviously. Other amendments have strengthened IP protection and enforcement, as well as increasing penalties for IP infringements.

In March 2017, for example, the General Provisions of the Civil Law were amended to make clear that trade secrets can be protected under civil IP laws. Amendments to the 1993 Anti-Unfair Competition Law in early 2017 also improved protection for trade secrets.




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China’s most recent, 13th five-year plan, approved by the National People’s Congress in early 2016, envisions China as a world leader in science, hi-tech and intelligent machines:

We will…expedite implementation of national science and technology programs… make breakthroughs in core technologies in fields including next generation information and communications, new energy, new materials, aeronautics, biomedicine and smart manufacturing…

Perhaps the best example of China’s goal of becoming a global leader in artificial intelligence (AI) is in the area of facial recognition technology. These systems, which automatically identify an individual from a database of digital images, are now a part of everyday life in China in areas such as public security, financial services, transport and retail services.

This technology is also just one aspect of a broader system being rolled out by the Chinese authorities. It aims to monitor and influence the whole of Chinese society (individuals and organisations) through social credit ratings.

The global facial recognition industry is forecast to be worth US$6.5 billion by 2021, and its continued growth in China is being spurred by innovative start-ups like Yitu Technology and DeepGlint.

China knows that an essential part of achieving its aim of “science and intelligent technology leadership” is putting in place high quality legal protection for intellectual property. However, as recent reports from the United States have found, there remain many deficiencies in China’s protection of trademarks, copyrights, and patents.

IP enforcement in the case of piracy and other breaches is often inadequate. Either there is no prosecution of breaches, no positive finding that a breach has occurred or the penalty applied is too light to have any deterrence value.

The ConversationHowever, for firms that do take the trouble to properly register their IP in China, protection does exist and enforcement is improving and will continue to improve.

Alice de Jonge, Senior Lecturer, International Law; Asian Business Law, Monash University

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

Australia should steer clear of the sanction fight between the US and China


Bruce Baer Arnold, University of Canberra

Even though Australia follows the United States in much of its policy, Australian exporters and consumers will be hoping we don’t get caught in the crossfire as the US and China impose sanctions on each other.

US President Donald Trump has the power to impose trade sanctions on China for its disregard of US intellectual property (IP) rights: patents, trademarks and copyright.

These sanctions could make Chinese exports more expensive or prevent access to the US market. China has already indicated it will play tit for tat, imposing its own sanctions.




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Trade disputes are often as much about rhetoric as about reality. China will remind the world that the US began as a pirate nation, harvesting European technological innovation and cultural production (such as work by Byron, Shelley, Dickens and Trollope) on the basis that it was a developing nation and because it could.

Away from the headlines China will likely take the US to the World Trade Organisation (WTO), a global mechanism for resolution of trade disputes. The US has announced it will take China to the WTO over patent violations.

The US will presumably ramp up claims with the WTO against other trading partners (such as India, Indonesia, Thailand and members of the European Union) that appear on its watch list for allegedly pirating US knowhow.

What this means for Australia

Academics such as Matthew Rimmer have astutely highlighted disadvantages for Australian consumers as citizens of an IP colony. This is where we import more than we export in content and pay a premium for work from overseas.

For example, we pay more than our US counterparts for software and hardware that most people take for granted. Our IP regime – in principle and practice – construes many violations of IP rights as piracy.

Our regime is aligned with that of the US. That reflects our traditional defence policy and the significance of US investment. What is good for US companies Microsoft, Pfizer and Disney is deemed to be good for Australia.

But joining in this cascade of retaliation will jeopardise economic growth, foster political unrest in developing economies and penalise consumers. The salient feature of economic growth over the past four decades has been globalisation – trade and investment across borders – rather that fundamental productivity gains through information technology.

Integration with the global economy (alongside the hollowing-out of local manufacturing and the TAFE system) mean that we cannot turn back the clock to the days of Alfred Deakin. Deakin’s grand compromise – the Australian Settlement – promised to protect small farmers, local manufacturers and workers behind walls that restricted migration and imports.

The headline-grabbling sanctions from Trump might also not necessarily be supported. Some business leaders recognise the importance of trade across the global economy and are perplexed by the current policy that seems to be driven by Trump’s late-night tweeting rather than anything coherent.

Where does that leave China?

China’s response has so far been cool. Moderation in the public arena highlights the idiosyncratic nature of Trump’s statements. It also reflects a deeper reality.

China wants to sell high-technology products to Australia, the US and other nations. One is example is 5G telecommunication networks from Huawei.

It wants the advantages that come from exploitation of the global IP regime, with its innovators and entrepreneurs building portfolios of patents and buying leading Western brands. It is likely to emulate what we saw with Japan: from “pirate” to IP citizen, complying with laws, within a few decades.




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Beijing is slowly strengthening the enforcement of IP rules in key regions such as China’s Pearl River Delta. In part that’s an effort to reduce the backlash in its export markets and it’s also a recognition that growth may be a matter of fostering innovation rather than copying or cheap labour.

The ConversationAustralia sources many manufactured items from China, with that production often dependent on US, Japanese and EU IP. Our own economy depends on exports of commodities; universities are dependent on overseas (particularly Chinese) students. So we don’t want to see an increase in international tensions and don’t want a slowing of the global economy because of a cascade of tit-for-tat sanctions.

Bruce Baer Arnold, Assistant Professor, School of Law, University of Canberra

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

China, North Korea and trade the key talking points when Turnbull meets Trump



File 20180220 161908 1br71rj.jpg?ixlib=rb 1.1
Malcolm Turnbull will be relieved to have some time away from the Barnaby Joyce affair when he arrives in Washington this week.
Reuters/Jonathan Ernst

Tony Walker, La Trobe University

Malcolm Turnbull was no doubt relieved when the prime ministerial jet lifted off from Australian soil yesterday, bound for the United States and his first formal round of discussions in Washington with an American president.

In Turnbull’s own words – applied to Deputy Prime Minister Barnaby Joyce’s domestic troubles – he will be hoping to leave behind a “world of woe”.

After a steadier start to the new year, the Joyce scandal, involving an affair with a political staffer, has cut the ground from under those improved prospects.

This has been reflected in the latest round of polling, which shows the Coalition slipping back against the Labor opposition. Turnbull’s own approval rating has taken a hit.

For these and other reasons, not least the need to establish a sound working relationship with a new administration, the prime minister will be looking to a circuit-breaker.




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Whether Turnbull’s “first 100 years of mateship” visit to Washington – with state premiers and business leaders in tow – provides a diversion from his domestic woes remains to be seen.

The hokey branding for the mission refers to the centenary of American soldiers fighting under Australian command on the Western Front in the Battle of Hamel in 1918.

In Washington, Turnbull’s discussions with President Donald Trump will focus primarily on China’s rise, the North Korean nuclear issue, and trade.

How to respond to North Korea’s provocations represents an immediate problem. But in the longer term, China’s expanding power and influence constitute the greatest security challenge facing Australia since the second world war.

In his public statements, Turnbull has been alternately hawkish and conciliatory toward Beijing, but it appears his instincts tend to align themselves with an American hedging strategy.

The Turnbull view of how to manage China’s rise was given particular expression in a speech in June 2017 to the annual Shangri-La Dialogue in Singapore. In this speech he called for “new sources of leadership [in the Indo-Pacific] to help the United States shape our common good”.

Turnbull’s Shangri-La speech was forthright for an Australian prime minister. He sharply criticised China’s “unilateral actions to seize or create territory or militarise disputed areas” in the South China Sea.

Beijing denies it, but it is clear it has been constructing a defence perimeter on islands and features in disputed waters. This prompted the following from Turnbull:

China has gained the most from the peace and harmony in our region and it has the most to lose if it is threatened … A coercive China would find its neighbours resenting demands they cede their autonomy and strategic space and look to counterweigh Beijing’s power by bolstering alliances and partnerships, between themselves and especially with the United States.

That speech was followed by increased efforts to expand a quadrilateral security dialogue between Australia, Japan, India and the US.

Turnbull’s visit to Japan in January for high-profile talks with Japanese Prime Minister Shinzo Abe emphasised shared regional security goals with other members of the so-called Quad.

What steps might be taken to further develop security collaboration between Australia, the US, India and Japan will almost certainly be on the table in Washington.

The Trump administration’s appointment of Admiral Harry Harris, the outgoing head of the US Pacific Command, as the ambassador-designate in Canberra is a signal of its intentions.

Harris has a hawkish view of China’s expanding influence in the Indo-Pacific. His participation in a security conference in Delhi in January along with Australian, Japanese and Indian naval commanders was significant in light of stepped-up efforts to bolster maritime collaboration between Quad members.

However – and this is a sizeable “however” – Turnbull needs to be careful not to be sucked into an American slipstream where China is concerned. Australia’s commercial interests dictate prudence in how it positions itself between a rising China and the US under an unpredictable Trump presidency.

The new US National Defence Strategy exposed differences between Canberra and Washington in their views of “revisionist” China and Russia as threats to US hegemony.

Foreign Minister Julie Bishop felt obliged to distance Australia from the Trump administration’s characterisation of attempts by China and Russia to “shape a world consistent with their authoritarian model”. She said:

We have a different perspective on Russia and China, clearly. We do not see Russia or China as posing a military threat to Australia.

Turnbull, for his part, provided a more nuanced response. He said:

We don’t see threats from our neighbours in the region but nonetheless every country must always plan ahead and you need to build the capabilities to defend yourself not just today but in 10 years or 20 years hence.

Australia’s 2016 Defence White Paper and 2017 Foreign Policy White Paper (the two documents should be read in conjunction) sketched out a future in which the country needs to buttress its defence capabilities in light of China’s rise.

Apart from China and related security matters, Turnbull will focus on trade in Washington. He will no doubt try to persuade Trump to revisit his decision to pull the US out of the Trans-Pacific Partnership trade agreement, now rebranded as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The US withdrawal from the TPP, as one of Trump’s first executive acts as president, was disappointing. A trading bloc in the Indo-Pacific accounting for 36% of global GDP would have served as a counterweight to China’s surging trade and investment ambitions.

The revised CPTPP – including Australia, Japan, Canada, Mexico, New Zealand, Malaysia, Peru, Singapore, Chile, Vietnam and Brunei – remains significant. But clearly the abrupt US withdrawal has lessened its reach.

Significantly, Turnbull will discuss the CPTPP on the eve of the initialling of the agreement among the 11 remaining participants on March 8.

Trump has indicated he might be receptive to arguments for American re-engagement in the CPTPP process. However, this would require the renegotiation of provisions on such contentious issues as dispute settlements, copyright and intellectual property.

It is hard to see this happening in a timely manner. In a sense, the train has left the station.




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The Turnbull-Trump focus on China may also yield discussion about a competing regional infrastructure investment initiative to balance China’s “Belt and Road” program.

The latter is a vast Chinese infrastructure scheme. China is seeking to strengthen its influence in surrounding states by recycling a portion of its foreign exchange reserves in road, rail, port and other such projects.

It is not clear just how Turnbull and Trump might seek to provide alternative sources of infrastructure funding for projects to counter Chinese attempts to buy influence far and wide.

The ConversationSuch a scheme emerged from a pre-summit briefing in Canberra. The fact it is being floated attests to concerns in Washington and Canberra about China’s success in using its financial heft to extend its security interests.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

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

Australia may be engaging in ‘free trade’ but it’s becoming more protectionist too


Giovanni Di Lieto, Monash University

The federal government may be aggressively negotiating free trade agreements, but in other ways it is restricting trade. The government has been giving itself extensive new anti-dumping powers, targeting steel and aluminium markets in particular.

There was a nearly two-fold increase in anti-dumping investigations in Australia in 2017. According to the Productivity Commission, these protectionist measures “raise costs to consumers and reduce competitive pressures, leading to less efficient resource use in the country levying the protection”.

Higher tariffs lift the costs of imports and disrupt global supply chains. This harms consumers, producers and workers.

The Productivity Commission estimates that for every A$1 increase in tariff revenue, economic activity in Australia falls by A$0.64. The commission also says that for “every year that higher tariffs prevailed, GDP would be lower by over one per cent”. Thus, “a household that spends A$2,500 a fortnight on goods and services would be worse off by A$100 a fortnight”.




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The Australian Department of Industry explains that:

dumping occurs when goods exported to Australia are priced lower than their “normal value”, which is usually the comparable price in the ordinary course of trade in the exporter’s domestic market.

A recent example of this in action was when the Anti-Dumping Commission found that major exporters of tinned Italian tomatoes were dumping their product in Australia. The government swiftly imposed dumping duties of up to 8.4%.

In principle, this is perfectly legitimate. World Trade Organisation agreements allow these duties to be imposed when dumping or subsidisation threaten to cause material injury to a domestic industry.

More power for the government

But recent changes to Australia’s anti-dumping laws, while purportedly aimed at “levelling the field”, place a greater legal burden on overseas businesses with more stringent submission requirements.

Moreover, legislative proposals tabled in the federal parliament in late 2017 could vastly expand the discretionary power the government has to set benchmark prices for imported products in the Australian market. These can even be set at higher levels than the prices in the home market from which they were exported.

Indeed, according to international trade law practitioners, “dumping duties at high rates will give the Minister an unprecedented price-fixing power over imported products, to the extent that foreign exporters and their Australian importers may be unable to compete in Australian markets”.

In other words, this proposal could exacerbate the trend of covert trade protectionism in Australia.

According to a 2017 WTO report on trade measures in the G20 countries, new anti-dumping actions have outpaced terminations by three to one. This is the largest gap since 2012. Australia also had a fourfold increase in new countervailing duty measures (trade retaliations, in other words) from 2015 to 2016, second only to the USA. In 2016 Australia started nearly one-third of all G20 trade retaliations.

Initiations of anti-dumping investigations in G20 countries (2016-17)
World Trade Organization
Initiations of countervailing duty investigations in G20 countries (2015-16)
World Trade Organization

The subjects of anti-dumping actions are usually technical barriers to trade that measurably affect certain industries. In the G20 countries most of these relate to agricultural policies.

Australia has in recent times raised specific trade concerns about the European Union’s agriculture policies, India’s minimum prices for wheat and sugar, Canadian subsidies for milk and wine, and the United States’ purchase of cheese stock, export credit guarantees and international food aid.




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The anti-dumping data and legislative trends clearly show that Australia is at the forefront of the trend towards greater (covert) trade protectionism among developed countries.

Several government policies, including the abolition of the temporary work 457 visas, the Australian Securities and Investments Commission’s exemption of certain foreign financial suppliers from particular regulatory requirements, and the Mobile Black Spot Program (to improve mobile coverage in regional and remote Australia) have also come under scrutiny by the World Trade Organisation

The ConversationThis does not completely undermine Australia’s leadership in new free trade agreements in the Asia Pacific region and beyond. But it does show that Australian trade diplomacy is taking place within the creation of a less-than-liberal order of global economy.

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

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

Farmers and services industry the winners under the revised Trans-Pacific Partnership trade deal


Giovanni Di Lieto, Monash University

The revived trade agreement, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), has finally made it across the line. It’s a considerable win for Australian farmers and service providers, in a trading area worth about A$90 billion.

The 11 remaining countries from the initial Trans-Pacific Partnership agreement finally agreed to go ahead with the deal without the US, at the annual meeting of the World Economic Forum in Davos, Switzerland.

The deal reduces the scope for controversial investor-state dispute settlements, where foreign investors can bypass national courts and sue governments for compensation for harming their investments. It introduces stronger safeguards to protect the governments’ right to regulate in the public interest and prevent unwarranted claims.




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Australia’s tenuous place in the new global economy


Despite earlier union fears of the impact for Australian workers, the CPTPP does not regulate the movement of workers. It only has minor changes to domestic labour rights and practices.

The new agreement is more of an umbrella framework for separate yet coordinated bilateral deals. In fact, Australia’s Trade Minister Steven Ciobo said:

The agreement will deliver 18 new free trade agreements between the CPTPP parties. For Australia that means new trade agreements with Canada and Mexico and greater market access to Japan, Chile, Singapore, Malaysia, Vietnam and Brunei.

It means a speedier process for reducing import barriers on key Australian products, such as beef, lamb, seafood, cheese, wine and cotton wool.

It also promises less competition for Australian services exports, encouraging other governments to look to use Australian services and reducing the regulations of state-owned enterprises.




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Australia now also has new bilateral trade deals with Canada and Mexico as part and parcel of the new agreement. This could be worth a lot to the Australian economy if it were to fill commercial gaps created by potential trade battles within North America and between the US and China.

What’s in and out of the new agreement

The new CPTPP rose from the ashes of the old agreement because of the inclusion of a list of 20 suspended provisions on matters that were of interest for the US. These would be revived in the event of a US comeback.

These suspended provisions involved substantial changes in areas like investment, public procurement, intellectual property rights and transparency. With the freezing of further copyright restrictions and the provisions on investor-state dispute settlements, these suspensions appear to re-balance the agreement in favour of Australian governments and consumers.

In fact, the scope of investor-state dispute settlements are narrower in the CPTPP, because foreign private companies who enter into an investment contract with the Australian government will not be able to use it if there is a dispute about that contract. The broader safeguards in the agreement make sure that the Australian government cannot be sued for measures related to public education, health and other social services.




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The one part of the agreement relating to the temporary entry for business people is rather limited in scope and does not have the potential to impact on low-skilled or struggling categories of Australian workers. In fact, it only commits Australia to providing temporary entry (from three months, up to two years) of only five generic categories of CPTPP workers. These include occupations like installers and servicers, intra-corporate transferees, independent executives, and contractual service suppliers.

The above categories squarely match the shortages in the Australian labour market, according to the Lists of Eligible Skilled Occupation of the Home Affairs Department.

Bits of the original agreement are still included in the CPTPP such as tariffs schedules that slash custom duties on 95% of trade in goods. But this was the easy part of the deal.

Before the deal is signed

The new agreement will be formally signed in Chile on March 8 2018, and will enter into force as soon as at least six members ratify it. This will probably happen later in the year or in early 2019.

The geopolitical symbolism of this timing is poignant. The CPTPP is coming out just as Donald Trump raises the temperature in the China trade battle by introducing new tariffs. It also runs alongside China’s attempts to finalise a much bigger regional trade agreement, the 16-nation Regional Comprehensive Economic Partnership.

Even though substantially the CPTPP is only a TPP-lite at best, it still puts considerable pressure on the US to come out of Trump’s protectionist corner.

It spells out the geopolitical consequences of the US trade policy switch, namely that the Asia Pacific countries are willing to either form a more independent bloc or align more closely with Chinese interests.

The ConversationWill this be enough to convince the Trump administration to reverse its course on global trade? At present, this seems highly unlikely. To bet on the second marriage of the US with transpacific multilateral trade would be a triumph of hope over experience.

Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University

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

Counter-terrorism measures permanently reduce international trade: new study


Chris Doucouliagos, Deakin University and Cong S. Pham, Deakin University

Enhanced counter-terrorism measures help to protect lives, but unfortunately also reduce trade, our study shows. The costs of increased security measures are also not shared equally. While some costs are passed onto consumers, exporters and importers often bear the higher costs.

Since 2000, there have been more than 72,000 terrorist acts causing nearly 170,000 deaths. In our study we analysed the impact of terrorism on trade in over 160 countries from 1976 to 2014.

The effects of terrorism in one country spill over across national borders to reduce the trade of other nations. On average, each terrorist incident reduces trade by about US$6.4 million for each trading partner. The effect is also long lived; a terrorist attack can reduce trade over the next five years.

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How security measures change trade

One way counter-terrorism reduces trade is through time delays. Some security and counter-terrorism measures cause longer delays at airports, ports and borders and thereby increase the time it takes to trade.

Food products are particularly vulnerable to shipping delays and the disruption of supply chains that arise from tighter border controls. Trading delays can be very costly. One study shows trade is reduced by more than 1% for each additional day it’s delayed.

Counter-terrorism measures also increase charges and transport costs. Transport costs in particular are critical for trade.

Terrorism has led to higher security surcharges at ports and airports and higher insurance premiums. Requirements for businesses to report suspicious transactions cause delays, also increasing trading costs.

After the September 11 attacks in the US, many nations applied stricter counter-terrorism measures to combat money laundering and the financing of terrorism. These measures add to the cost of importing and exporting.

Some of the individual cost components may be relatively small. For example, anti-money-laundering compliance costs in Australia are pretty insignificant. Nonetheless, all these delays and charges add up.

As the OECD points out, doing nothing about terrorism is not an option. Preventive security measures are indispensable to secure trade, infrastructure and lives.

However, some counter-terrorism measures are effectively non-tariff barriers that do more to protect specific industries than to protect people. That is, some security measures have a similar effect to tariffs, in that they divert trade from lower cost overseas producers, to higher cost domestic producers.

And some measures are ineffective. For example, a key objective of counter-terrorism policies to control money-laundering is to choke off external funding for terrorists. However, some terrorist groups, most notably insurgents in Iraq and ISIS, are largely self-financed.

Our results also show that terrorism has a greater adverse effect on trade in sub-Saharan Africa in particular. This region is particularly vulnerable to terrorism due to governance problems such as corruption. Ironically, this region is especially in need of the benefits of trade to improve governance and institutions.

Our study also shows terrorism reduces trade by diverting government attention from trade liberalisation and reform. Promoting trade is an even more difficult task in an era of accelerated terrorism.

Trade itself can help counter terrorism

Trade spillover effects created by terrorism highlight the importance of co-ordinating counter-terrorism measures between countries. However, this also requires greater co-ordination between policies.

Trade can play an important role in curtailing terrorism by bringing nations closer and fuelling economic prosperity and development. Combined with other economic policies and strategies, greater co-ordination between security and trade policies can increase safeguards while lowering trade barriers. It can also offset the higher trade costs that result from extra security measures.

The ConversationBy reducing trade, counter-terrorism policies inadvertently drive a wedge between nations and make nations poorer. Making countries poorer in turn makes it harder to combat terrorism.

Chris Doucouliagos, Professor of Economics, Department of Economics, Deakin Business School and Alfred Deakin Institute for Citizenship and Globalisation, Deakin University and Cong S. Pham, Senior Lecturer in Economics, Deakin University

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

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.