The future of the rules-based trading system has never looked more uncertain. Due to negotiation paralysis at the World Trade Organization, the rulebook on trade and investment has not been updated in nearly 25 years. There is deep concern that the actions of the two largest economies in the world may further strain the multilateral trading system. China’s rise has not seen the emergence of a market-driven economy. Rather, its market distorting policies have created major trade irritants in areas such as overcapacity for steel production and intellectual property theft. The Trump administration is calling for a complete reset of United States trade policy, skeptical of multilateral trade agreements and the World Trade Organization. It has reverted to managed trade practices and the tariff is its tool of choice. The tariff war that the United States and China are currently engaged in risks escalation and may prove difficult to wind down any time soon.
However, other countries are doubling down on multilateral trade liberalization efforts, producing a series of ambitious mega trade agreements. Japan and the European Union have been at the forefront of this effort, recently signing a trade agreement that covers a third of world GDP and will eliminate on almost all tariffs between them. Japan also led the effort to rescue the Trans-Pacific Partnership trade agreement, which is expected to go into effect next year. Against this backdrop, reform of the World Trade Organization has gained greater urgency.
On October 8, the Center for East Asia Policy Studies hosted a panel of experts to examine the challenges facing the rules-based trading system in this geopolitical moment. They discussed how we arrived at this critical juncture with protectionism on the rise, the parallels to previous eras of protectionist backsliding, and the survival of the World Trade Organization and what can be done to reform it. They also addressed potential off-ramps for the U.S.-China trade war, how to prevent major rifts between the United States and its trade and security allies, and the role that Japan and others can play in sustaining the rules-based trading system.
Full Professor, Faculty of Economics and Business, and Head, Research Centre of International Economics, Leuven - University of Leuven
Henry L. Stimson Professor of Law - Harvard Law School
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AAPI Heritage Month: Safeguarding Asian American inclusion and belonging
President López Obrador's extension of the term of Supreme Court chief Arturo Zaldívar is part of his strong effort to recentralize power in the Mexican presidency and hollow out the independence and power of other Mexican institutions. His other moves to bend the justice system to his will include a reform that lowered the salary of judges but did not improve the quality of prosecutors and his unwillingness to allow an independent selection of the attorney general, with López Obrador himself retaining the power of appointment. His latest move with the two-year extension of Zaldívar’s term is especially worrisome. Zaldívar is also the president of the powerful Federal Judiciary Council. The council appoints and dismisses judges, sets career advancement rules and disciplines judges. Zaldívar will be setting the council’s and, thus, the whole judiciary’s, agenda and priorities for two years. This allows López Obrador to influence how courts will rule in cases regarding the executive branch, what cases they take up and the legality of new policies. These moves are taking place when the effectiveness of the judiciary in Mexico remains limited and deeply concerning. The attorney general’s office has proven weak, unwilling to take up key cases such as against the suspects in the brazen attack on Mexico City’s security minister, Omar García Harfuch—an event that symbolized the impunity with which Mexican criminal groups operate. Mexico’s justice system showed itself equally meek and disappointing in inadequately investigating the alleged complicity of former Mexican Defense Minister Salvador Cienfuegos and dismissing the case, potentially the most significant case of corruption and criminal collusion charges against a high-ranking Mexican official in two decades. A decade and a half after Mexico initiated its justice system reforms, 95 percent of federal cases still go unpunished. President López Obrador has scored some points, but the already precariously weak rule of law in Mexico, and thus the Mexican people, will suffer.