Global Trade & Geopolitics Today — China, Cyberespionage, Sanctions, Bribery ……. Trade is More than Trade.

      Global Trade (8.6.13)
     Huge issues concerning global trade policy have emerged the last few weeks. They range from new economic sanctions, inequality and trade agreements,  foreign investment treaties, global bribery, new WTO panel decisions against China, multinational taxation, and cyberespionage for commercial gain. These issues further evidence the complexity and growing areas of connection concerning global trade especially as they relate to national security, and geopolitics.
  •  The Crimea crisis has raised the issue of whether or not economic sanctions have become more important in foreign policy and diplomacy given the increased globalization and inter-connectedness of the global system. More so since the 2008 Georgia crisis and the increased U.S. experience with the Iranian sanctions. “Crimea: Globalization and Economic Sanctions.Financial Times (March 4, 2014). The United States is planning to use its new energy (natural gas) production and exports as a trade weapon in its foreign policy and diplomacy aimed at Russia. “Energy and Diplomacy — U.S. & Putin (Crimea).New York Times (March 6, 2014). It is argued that sanctions against individuals are more like painless drone attacks (“Magnitsky” type of illusions) rather than more effective financial sanctions against major financial institutions (government and private). “Londongrad and Financial Sanctions.” Financial Times (March 6, 2014). 
  • This article by Joseph Stiglitz is a frontal assault on the TPP, trade agreements and globalization.  He equates recent trade agreements to those stemming from the Opium Wars, they contain noxious provisions, rely on the discredited theory of free trade, they reflect global inequality and promote the same within the U.S., and he rejects ‘trickle-down’ economics as a myth.  “On the Wrong Side of Globalization.” New York Times (March 17, 2014).
  • Investor-state provisions in trade agreements and investment treaties promote greater foreign direct investment. It takes governments out of the game of bringing actions on behalf of companies and allow private corporate actions. This reduces government friction and promotes the normalization and commercialization of FDI. In fact, this approach is a more modern approach to settling transnational disputes than the 19th century prohibition in international relations against giving ‘standing’ to private parties in international arbitration. That approach is dysfunctional and outdated. Trade and investment today are conducted by corporations and they should have a viable recourse over contract disputes often involving nationalization and bad state behavior. “Investor-State Treaties Promote the Law. Financial Times (March 26, 2014). 
  • U.S. DOJ bribery crackdown since 2007 has increased significantly but has had a slight decrease last year (2013). Global Bribery Crackdown Gains Steam.” Wall Street Journal (March 26, 2014).
  •  A WTO panel ruled against China in the Rare Earth Case brought by the United States and others. The United States argued that the Chinese export duties on rare earth materials were not justified under the “General Exception” of Article XX to protect health, they were not valid under Article XX conservation of resources, and China’s restrictions violated ‘trading rights.’  “WTO Issues Panel Reports on China’s Rare Earths Exports” WTO News (March 26, 2014). “U.S. Wins Victory in Rare Earths.” USTR News (March 26, 2014). “China’s Curbs on Metal Exports are Found to Violate Trade Laws.” New York Times (March 27, 2014).
  • A WTO panel gave a split decision to China’s complaint against the United States in applying its new 2012 legislation allowing a countervailing duty action on imports from non-market economies. It upheld the U.S. legislation but held against it for failure to investigate possible ‘double remedies’ arising out of related antidumping actions. “WTO Issues Panel Report on US Measures on Chinese Products.WTO  News (March 27, 2014). “U.S. Welcomes WTO’s Rejection.” USTR News (March 27, 2014).
  • In the last 13 years since 9/11 sanctions for domestic political and foreign policy reasons have exploded worldwide.Sanctions: War by Other Means.Financial Times (March 31, 2014).
  •  China’s trade policy is now not just to join the global trading system but to help write the rules for 21st century global commerce and trade. “China Craves Invitation to join Global Trade Club.Financial Times (April 3, 2014). China wants to be included in the new rule-making efforts for global commerce led by the U.S. The U.S. is taking the lead in the TPP, TTIP and Geneva Services negotiations. This explains the push by China for a new China- EU trade agreement. “Xi Urges Sino-EU Agreement on Trade.” Financial Times (April 2, 2014).
  • The issue of tax avoidance by U.S. multinationals has been highlighted again by Senate hearings concerning Caterpillar. “Switching Names to Save on Taxes.” New York Times (April 4, 2014). 
  • China wants to be included in the new rule-making efforts for global commerce led by the U.S. The U.S. is taking the lead in the TPP, TTIP and the Geneva Services negotiations. This explains the push by China for a new China –  EU trade agreement.China Courts EU on Bilateral Trade Agreements.” Financial Times (April 20, 2014). 
  • The proposed federal increase in spending on cyber technology by the Defense Dept. over the next five years is over $26 billion. We say this is only for national security and not commercial espionage. Don’t think the Chinese are buying this. They view economic and national security interests as the same. “U.S. Assures China on Cyberespionage Policy (Not for Commercial Gain).” New York Times (April 7, 2014).

 

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About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (School of Public Policy).
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