Think Tanks Recommend Responses to Trade Coercion
Perth USAsia Centre, a think tank that focuses on relationships between Australia, the U.S. and Asian countries, and the Asia Society Policy Institute say that while the World Trade Organization is not well-equipped to combat trade coercion, there are international approaches that could make the tactic more costly for perpetrators and help injured companies that are hurt by the coercion.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Their report, which calls trade coercion a growing threat, makes a distinction between protectionism and "the arbitrary application of trade measures – such as quotas, anti-dumping measures and/or phyto-sanitary barriers – with the deliberate intent of economically harming a trade partner."
The policy options paper does not name names or examples, though Australia has been the victim of Chinese trade coercion repeatedly, on coal, wine and barley. But China is not the only player that uses trade to "apply political pressure on a trade partner as part of a broader diplomatic dispute," as the paper describes the goal of the actions. Former President Donald Trump threatened to apply 5% tariffs to all Mexican imports if the flow of Central American migrants through Mexico was not stemmed, for example (see 1905310005).
The report said that trade coercion affects small and medium-sized countries more because they cannot respond as effectively to large countries.
"It also undermines confidence in rules-based approaches to trade, at a time when the global trading system is under enormous stress," the authors wrote, and it's difficult to identify. "These measures are often informal and subject to plausible deniability," the report said.
The WTO is not a good forum to address the problem, not only because it's difficult to prove, and because there is no binding dispute resolution there with the end of the appellate body, but because dispute settlement takes too long, they said. "WTO is facing major challenges in all pllars of its work – negotiation, monitoring and dispute settlement. Adding additional responsibilities and expectations for the WTO to address coercive trade practices is unrealistic. However, that does not mean the WTO -- as the world’s principal trade rule-making body -- can ignore a systemic threat to the integrity of the global trade system," they wrote. They also said that consultation during dispute settlement at the WTO "can in appropriate cases be useful in calling out the practice and highlighting unacceptable or groundless explanations."
The authors say that the issue should be taken up in the G-20 and in the Asia-Pacific Economic Cooperation (APEC), but said there also are ways for countries that could be victimized to prepare, and to respond to coercive actions.
They said that countries should make risk assessments of sectors that are highly dependent on trade with a small number of partners, and then diversify where those exports go to or inputs come from. "Diversity in trade relationships is the single most effective defence against trade coercion," they said.
If there is an action, the government can provide support for affected industries, and talk to other countries about what they're willing to do. "At a minimum, public statements of solidarity help raise awareness of the issue and impose reputational costs for those undertakin[g] coercion. Joint statements between a group of countries can also help build international norms against trade coercion," they wrote.
They also suggested that other countries should consider lifting tariffs or easing tariff rate quotas on products of economies that are being subject to trade coercion.
"Such actions could help those affected economies on a time-limited basis, as they seek to diversify their trading relationships," they said, also saying that the changes should be done so that they do not discriminate against other countries.