William Krist's Blog, page 25

WTO 2025: Constructing an Executive Branch

When the term “WTO reform” is mentioned, what first comes to mind for most observers is restoring binding dispute settlement, followed by overcoming the lack of negotiation of new multilateral agreements, and in third place, if it is thought about at all, monitoring—a Secretariat function. This grossly understates the current role of the WTO Secretariat and the role it might usefully perform.

It is a fact universally acknowledged by all students of political science that a proper representative form of governance must consist of three branches of activity—legislative (rulemaking in the case of the WTO), judicial (dispute settlement), and administrative or executive. Not every situation in international commercial relations requires a new rule, nor is it the subject of a dispute. There is, often, however, a steady demand for an administrative element that supports daily the smooth functioning of the world trading system. Here, there is an institutional deficiency that any serious consideration of reform should address. The role of the Secretariat, the staff of the WTO, differs substantially in many respects from those of its sister international economic institutions—the World Bank and the International Monetary Fund (IMF or Fund). There are also features that distinguish the WTO from the Organization for Economic Cooperation and Development (OECD). The differences have had consequences.

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To read the full report from the Peterson Institute for International Economics, please click here.

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How the War in Ukraine is Reshaping World Trade and Investment

The war in Ukraine is causing worldwide disruptions to trade and investment, affecting auto makers in Europe, hoteliers in Georgia and the Maldives, as well as impacting consumers of food and fuel globally. Although the world’s poor—who spend a large part of their incomes on life’s necessities—are the most vulnerable, no country, region, or industry is left untouched by these disruptions.

A new World Bank report — The Impact of the War in Ukraine on Global Trade and Investment — shows that world trade will drop by one percent, lowering global GDP by just under one percent. Manufacturing exporters such as Vietnam, Thailand, and Mexico see a sharp decline, especially in energy intensive sectors. Net exporters of crops, including Turkey, Brazil, and India, and of fossil fuels, such as Nigeria and countries in the Middle East, see a surge in their exports, attenuating the negative effects of the war. The economic shock waves are moving through five channels: commodity markets, logistics networks, supply chains, foreign direct investment (FDI), and sectors such as tourism. 

The war comes at a difficult moment for the world economy. The recovery from the pandemic-induced recession has been slowing as new coronavirus variants emerged sand governments reined in spending. Rising inflation has prompted the Federal Reserve and other major central banks to raise interest rates. Disruptions in world trade and investment will curb growth in developing countries and add to price pressures.  

Food and energy 

The potential for a food crisis is the most alarming concern. Prices of wheat and other grains have already soared. In 2019, Russia and Ukraine combined, accounted for 25 percent of the world’s wheat exports and 14 percent of corn shipments . Many countries around the world are heavily dependent on these flows. The Republic of Congo, for example, relies on imports from the Black Sea region for 67 percent of the wheat it consumes.  

After food prices, energy prices are the most directly affected. Russia is one of the world’s biggest energy suppliers, providing 14 percent of its crude oil and 9 percent of its natural gas globally.  Our simulation generates a 7 percent increase in the price of crude oil, which in turn raises the costs of transportation and production in manufacturing, leading to a drop in exports (Figure 1). Higher prices for natural gas, a key ingredient for ammonia fertilizer, will push up costs for farmers and reduce crop yields, further exacerbating food shortages. 

Figure 1: Change in exports relative to reference year as a share of real GDP  

Source: Chepeliev et al. (2022).

Trade-policy interventions risk making a bad situation worse (Figure 2). Export restrictions further reduce global supply, while import liberalization measures and subsidies increase demand. Since the beginning of the war in late February, 67 new trade policies have been imposed or announced. Export restrictions alone have added seven percentage points to the price of wheat and risk igniting a tit-for-tat escalation.  

Figure 2: International wheat prices and trade policy measures

Source: Ruta et al. (2022).

Input shortages and other disruptions 

The war and resulting sanctions have severed key transport links between Russia and Ukraine and the rest of the world, disrupting trade more broadly . Russia’s connections to European ports have been cut, and commodity exports to other destinations have been constrained. Ukraine’s Black Sea ports have been blockaded or occupied, leaving the country few routes for its commodity exports. Air freight between Europe and Asia must now be rerouted to avoid Russian airspace. Rail transit through Russia is slowing due to checks for sanctions compliance, and further rounds of sanctions could risk halting rail transit entirely.  

Disruptions to global and regional supply chains have caused input shortages and price hikes. Ukraine is a key supplier of inputs, including ignition cables for autos, neon gas for semiconductors, and iron ore for steel mills. Companies making transport equipment, machinery, electronics, and food products are especially reliant on Russian metals, chemicals, fertilizers, and other commodities.  

Russia and Ukraine aren’t major players in the world’s FDI networks, but the war will nevertheless have an impact on some countries and industries. Armenia, Moldova, and the Kyrgyz Republic depend heavily on Russian investment. And European countries including Finland, Germany, and Norway have major stakes in Russia’s energy sector.  

Tourism will also suffer, especially in developing countries. Georgia and Montenegro are highly dependent on Russian and Ukrainian visitors. A decline in global tourism will at least temporarily stall the industry’s post-pandemic recovery, as scheduled flights are disrupted and consumers reassess their travel plans. 

What are the war’s likely long-term effects?

Some fear that the war will lead to a corrosion of globalization – the engine of growth and development for the past 30 years. Our analysis shows that firms will re-assess geopolitical risks and may move production away from countries they see as riskier, possibly reshaping global value chains to some extent. But given the capital in place, the cost of searching for alternatives, and wage differentials across countries, this process is likely to be gradual rather than sudden. And it will not result in a reversal of globalization unless it is supported by pronounced government intervention.  

The big unknown and risk comes from policies aiming at fragmenting the trade system rather than defusing tensions and strengthening global value chains against future disruptions.

The Impact of the War on Ukraine on Trade and Investment -- The World Bank

To read the full report from the World Bank, please click here.

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Creating Incentives to Join the IndoPacific Economic Framework

Ambassador Katherine Tai, the U.S. Trade Representative (USTR), recently testified to Congress that trade can be a force for good – growing the middle class and addressing inequality – and that the U.S. is strongest when we work with our partners and allies around the world. ALI strongly supports these notions, appreciating the creativity and care with which the USTR is crafting trade policy and strategy. ALI strongly supports the USTR’s philosophy: that for a trade agreement to be effective, its benefits must be shared equally across the economy, especially by workers, small businesses, and underserved communities, which have often been ignored or hurt by past agreements.

An agreement’s results must also support sustainable and inclusive growth, while addressing shifting global alliances and new technologies. U.S. engagement in the Pacific is critical to this country’s workers, small businesses, values, and our economic and national security interests. ALI commends this Administration’s announcement of the Indo-Pacific Economic Forum (IPEF) and believes the U.S. must focus on being a standard setter – for worker, environmental, digital, and infrastructure standards – to be a 21st century global leader. This is especially important given China’s regional dominance, especially through its Belt and Road and Digital Silk Road initiatives. IPEF’s goal of high labor and environment standards, as well as digital standards of democracy, transparency, and accountability, are important counterparts to the model that China is offering in the region.

The first step in advancing IPEF will be offering sufficient incentives to attract a broader group of countries to join the framework, especially the Fair and Resilient Trade Pillar. While the ASEAN countries welcome U.S. regional reengagement, the Trade Pillar’s digital, labor, and environmental standards will require heavy domestic concessions from them. If it is to attract countries beyond Australia, New Zealand, Japan, Singapore, and South Korea, IPEF must include strong incentives for them to make the necessary difficult domestic changes.

Lowering tariffs is undoubtedly the best incentive. Although U.S. tariffs are generally quite low, the tariff schedule has peaks in sectors such as agriculture or textiles which are of particular interest to developing countries. When Vietnam wanted to gain access to lower duties on footwear and apparel by joining the Trans-Pacific Partnership, for example, it pushed through significant domestic reforms. Tariff market access may ultimately be necessary to achieve IPEF’s vision, and Congressional passage may eventually be necessary to assure countries that a future administration will not pull out

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To read the full report by the American Leadership Initiative, please click here.

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Examining Opportunities for U.S. Agricultural Exports to Colombia

Over the past decade, Colombia has distinguished itself as a fast-growing market for U.S. agricultural products. Between 2009–11 and 2018–20, the 3-year, annual average of U.S. agricultural exports to Colombia grew at a compound annual rate of 13.1 percent (not adjusted for inflation), compared with 2.0 percent for U.S. agricultural exports to all other countries, according to U.S. trade statistics collected by the U.S. Department of Commerce, Bureau of the Census, and compiled by USDA’s Foreign Agricultural Service in its Global Agricultural Trade System.

Several factors contributed to this growth. Two decades (2000–19) of economic expansion in Colombia generated greater consumer purchasing power and a larger middle class. In turn, consumption of foods such as chicken, pork, and fresh vegetables increased, and Colombians spent more money on food away from home. This period of economic growth was bolstered by the signing of a peace agreement in 2016 between the Colombian Government and the country’s largest guerrilla group.

Moreover, the Colombia-U.S. Trade Promotion Agreement (TPA)—a bilateral free-trade agreement (FTA) that took effect on May 15, 2012—gradually broadened Colombia’s access to the full range of U.S. agricultural products as part of the wholesale elimination of almost all the tariffs and quotas that had restricted U.S.-Colombia trade. The United States is one of many countries that have FTAs with Colombia (see map below). Had the United States not obtained an FTA with Colombia, it would have been at a competitive disadvantage with countries that had better access to the Colombian market through their FTAs with Colombia.

The TPA increased access for U.S. exporters to the Colombian market for a broad range of products—agricultural and nonagricultural—including bulk commodities such as corn and soybeans, intermediate goods such as soybean oilcake, and consumer-oriented products such as pork and poultry meat. To better understand the performance of U.S. agricultural exports to Colombia, researchers at Cornell University and USDA’s Economic Research Service examined the 10 leading product categories for these exports, as well as 5 additional product categories in which export growth from 2009 to 2018 was notably rapid. For the 10 leading categories of U.S. agricultural exports to Colombia, shipments totaled about $2.2 billion in 2020, accounting for 77 percent of total U.S. agricultural exports to Colombia that year (see chart below).

In addition to the 10 export leaders, researchers identified U.S. agricultural products for which annual exports to Colombia have risen from levels of less than $5 million a year to tens of millions of dollars since the TPA took effect in 2012. The chart below shows the rising value for five such products. One of those products is ethanol, which has emerged as a major U.S. agricultural export to Colombia since the TPA’s implementation, with annual sales exceeding $100 million in 2019 and 2020.

The United States accounted for a high share of Colombia’s imports in a number of product categories during the time period studied. To identify opportunities in the Colombian market, the researchers examined U.S. export performance in all 15 product categories. They compared the average year-to-year change in the value of U.S. exports to Colombia for each category from 2009 to 2018 with the average U.S. share of Colombian imports of that product during 2009–19 (see chart below).

With these data in hand, the researchers used a growth-share matrix to examine U.S. export performance in the 15 product categories and compare them in terms of possible market opportunities in Colombia. In the matrix chart below, the vertical axis shows the average annual growth in export value during 2009–18, while the horizontal axis illustrates the average share of the Colombian import market supplied by the United States in each category during 2009–19. This research found that for any given product category, when an increase in Colombia’s consumption was matched by an increase in domestic production, growth opportunities for U.S. exports of that product tended to be limited. However, when domestic consumption of that product was higher than domestic supply—and if this difference remained or expanded over time—export opportunities for the United States and other foreign suppliers of that product increased.

Matrix Group 1: Higher U.S. Market Share, Higher Growth in U.S. Exports

The three commodities in Quadrant I of the matrix chart above have a higher average U.S. share of Colombian import markets and a higher year-to-year increase in U.S. exports to Colombia. In these product categories—corn, soybeans, and pork—the United States has maintained a leading position among Colombia’s foreign suppliers, and the Colombian market is of growing importance to U.S. exporters. In 2018, corn led U.S. agricultural exports to Colombia, followed by soybeans as the third largest export and pork in fourth place.

Imports (from all countries) supply about 80 percent of Colombia’s total corn consumption, according to USDA estimates for marketing years 2018/19 through 2020/21. The United States is Colombia’s leading foreign supplier of corn—largely because of the TPA, which established separate transitional tariff-rate quotas (TRQs) for U.S. yellow and white corn. A TRQ is a quota for a specified volume of imports at a generally low tariff—zero percent in the case of the agreement for corn. After the quota is reached, a higher tariff applies to additional imports. The transitional TRQs for corn gradually expand each year for the first 11 years of the TPA. At the start of 2023, these TRQs will be eliminated, and there will be no tariff or quota barriers to U.S. corn exports to Colombia.

U.S. corn exporters face competition in the Colombian market primarily from Argentina and Brazil. As full members of the Southern Common Market (Mercosur), Argentina and Brazil are associate members of the Andean Community. This gives them preferential access to the Colombian corn market through the community’s price band system that sets upper and lower price limits for yellow corn. During parts of 2019, the price of yellow corn rose above the price band’s ceiling, so Colombia’s import tariff on yellow corn from Mercosur fell below the over-quota tariff on yellow corn from the United States. Since the United States is not a member of the Andean Community, U.S. corn exports to Colombia are not subject to this price band system. Instead, its exports are limited by the transitional TRQ created by the TPA, as mentioned in the previous paragraph. In the face of this temporary increase in Colombian corn imports from Argentina and Brazil, U.S. corn exports to Colombia dropped from 5.5 million metric tons (worth $927 million) in 2018 to 3.9 million metric tons ($683 million) in 2019 and then climbed back to 5.1 million metric tons ($879 million) in 2020.

Since 2017, the United States has supplied nearly all of Colombia’s soybean imports—compared with an annual average share of 70 percent during 2009–19 in terms of value. According to U.S. trade statistics, the United States exported an annual average of about 619,000 metric tons of soybeans (worth $224 million) to Colombia from 2018 to 2020. Domestic soybean production supplied about 15 percent of Colombia’s total soybean consumption from marketing years 2018/19 to 2020/21. During that period, Colombia’s soybean yields were about 82 percent of U.S. soybean yields. This relatively high level of productivity suggests that Colombian farmers could supply more of their country’s soybean demand if they were able to increase yields further or dedicate more land to this crop.

Supported by growing incomes, pork consumption in Colombia has grown since the TPA’s implementation. According to the Asociación Colombiana de Porcicultores, per capita pork consumption more than doubled from 2011 to 2019. This change was partly attributable to the TPA, which facilitated the imports of feedstuffs used in Colombian livestock production and made U.S. pork more broadly available to Colombian consumers.

Matrix Group 2: Lower U.S. Market Share, Higher Growth in U.S. Exports

The Colombian market is of growing importance to U.S. exporters for the second group of product categories: soybean oilcake, used primarily as animal feed, and soybean oil, used mainly as cooking oil. The U.S. share of the Colombian markets for imported soybean oilcake and soybean oil during the period examined was low compared with other categories (see Quadrant II of the matrix chart above). While the United States supplies almost all of Colombia’s soybean imports, it faces competition from Bolivia in Colombia’s markets for soybean oilcake and soyoil. Still, the opportunity exists for U.S. exporters who want to capitalize on Colombia’s increasing demand for these products. When the TPA was implemented in 2012, Colombia’s 20-percent tariff on U.S. soybean oilcake and similar residues was immediately eliminated, and the United States solidified its position as Colombia’s leading foreign supplier in this product category. Similarly, the volume of U.S. soyoil exports to Colombia nearly quadrupled, increasing from an annual average of about 27,000 metric tons (worth $32 million) during 2009–11 to 102,000 metric tons ($78 million) during 2018–20.

Matrix Group 3: Higher U.S. Market Share, Lower Growth in U.S. Exports

The third group consists of product categories with a high U.S. market share in Colombia but relatively low growth in U.S. exports to that country (see Quadrant III of the matrix chart above). In these categories, the Colombian market is likely saturated with imports, and future import growth will depend mainly on further increases in domestic consumption. Four product categories are included in this group: poultry meat, rice, distillers’ dried grains with solubles (DDGS) and starch residues, and cheese.

As with pork, rising incomes and trade liberalization—which boosted domestic chicken production through higher feedstuff imports—helped to increase Colombia’s consumption of poultry meat. According to the Federación Nacional de Avicultores de Colombia, per capita chicken consumption increased 54 percent from 2011 to 2019. Unlike pork, the increase in poultry consumption was supplied mainly by domestic producers.

Rice consumption in Colombia also has increased since the TPA’s implementation. However, rice consumption has grown at a much slower rate than pork and chicken consumption, reflecting rice’s long-standing status as a staple food in Colombia. Between 2012 and 2019, per capita rice consumption in Colombia rose from 40 kilograms to 43 kilograms, an increase of 7.5 percent. This increase was partly due to increased rice consumption in rural Colombia, where per capita rice consumption tends to be higher than the national average, and—according to reports from the Bogotá post of USDA’s Foreign Agricultural Service—to an influx of migrants from neighboring Venezuela, where rice is also a staple food. Trade liberalization under the TPA is another factor behind the rise in U.S. rice exports to Colombia. Like corn, U.S. access to the Colombian rice market is defined by a transitional TRQ that gradually expands each year and will be eliminated in 2030.

DDGS are a co-product of corn-based ethanol production, and the starch residues corn gluten meal and corn gluten feed are co-products of corn-based starch or sweetener production. All three products have high protein contents and are close substitutes for many feed products. During 2018–20, the United States exported to Colombia an annual average of about 210,000 metric tons ($44 million) of DDGS and 126,000 metric tons ($57 million) of starch residues. DDGS and starch residues from the United States gained duty-free status in Colombia immediately upon the TPA’s implementation.

Colombia’s annual imports of cheese and curd had never exceeded 1,000 metric tons before 2012, according to the Colombian Government’s trade statistics. However, with the TPA’s implementation in 2012 and the provisional implementation of the FTA between the European Union (EU), Colombia, and Peru in 2013, imports have significantly increased. During 2018–20, Colombia’s cheese and curd imports from all countries averaged about 5,000 metric tons ($27 million) per year. The United States supplied roughly three-fourths of these imports, according to Colombian statistics. With the broader access to imported cheese, Colombian consumption has risen. Annual per capita cheese consumption in Colombia increased from about 0.6 kilograms in 2009 to 1.8 kilograms in 2021, according to data from the market-measurement company Nielsen and the market-research company Euromonitor.

Matrix Group 4: Lower U.S. Market Share, Lower Growth in U.S. Exports

U.S. exports to Colombia in the last group of product categories—ethanol, milk concentrates, certain food preparations, waters and other nonalcoholic beverages—increased by lower percentages, while the U.S market share remained relatively low (see Quadrant IV of the matrix chart above). In these categories, U.S. exporters may find it more difficult to compete in the Colombian market. This is partly because of competition from other foreign suppliers, many of whom have duty-free access to the Colombian market through their countries’ FTAs with Colombia.

Ethanol has the highest average annual increase in exports among the product categories in this fourth group. During the 21st century, ethanol has been increasingly used in Colombia as an oxygenate in gasoline. The United States supplies roughly 40 percent of Colombian demand for fuel ethanol. According to U.S. trade statistics, the United States exported an annual average of 245 million liters (worth $98 million) of fuel ethanol to Colombia during 2018–20.

Increased fuel ethanol imports from the United States have amplified concerns about the economic competitiveness of Colombia’s own sugarcane-based fuel-ethanol sector, as well as the compatibility of free trade with Colombia’s domestic policies that regulate fuel and biofuel prices. In January 2019, the Colombian Government began an investigation of fuel ethanol imports from the United States in response to a petition filed by Colombia’s National Federation of Biofuels. In May 2020, Colombia applied a countervailing duty on U.S. ethanol that was equivalent to an ad valorem tariff of about 10.5 percent to 12.1 percent. An ad valorem tariff is calculated as a percentage of the good’s price.

Colombia’s annual imports in the milk concentrates category averaged about $108 million during 2018–20. Milk powder accounted for nearly all (99.6 percent) of these imports. With the TPA’s implementation, the United States has emerged as Colombia’s leading foreign supplier of milk concentrates, with a 49.0-percent share of Colombia’s milk concentrate imports during 2018–20. By contrast, the U.S. share averaged 32.0 percent during 2009–18. The TPA provides a transitional TRQ for U.S. milk powder, with a duty-free quota that gradually expands to an unlimited quantity starting in 2026. Most of Colombia’s powdered milk imports go directly to the food manufacturing sector for further processing.

Another emerging category comprises a variety of food preparations, including food preparations for infant use, malt extract and certain food products of flour or meal, and mixes and doughs. Following the TPA’s implementation, U.S. exports to Colombia in this category more than tripled in value—from a 3-year, annual average of about $2 million during 2009–11 to $11 million during 2018–20, according to Colombian statistics. Multiple countries supply such products to Colombia, with the country’s free-trade partners being the most prominent. The EU was Colombia’s leading supplier of this category during 2018–20 with a 32-percent share, followed by Mexico at 31 percent and the United States at 12 percent.

A separate category of food preparations includes protein concentrates and textured protein substances. In general, products in this category are intermediate goods used to make processed foods, animal feeds, and beverages. Again, multiple countries supply Colombia with products in this category, including Brazil and four of Colombia’s free-trade partners: the United States, EU, Mexico, and Peru. Annual U.S. exports to Colombia in this product category averaged $73 million during 2018–20, compared with $48 million during 2009–11, according to U.S. statistics.

A variety of products comprise the waters and other nonalcoholic beverages category, including mineral waters, carbonated soft drinks, nonalcoholic beer, milk-based drinks (chocolate milk, for example), and fruit and vegetable juices that have been fortified with vitamins or minerals. Since the TPA’s implementation, U.S. exports to Colombia in the waters and other nonalcoholic beverages category have more than quintupled in volume. The average annual value of these exports was about $23 million during 2018–20, according to U.S. trade statistics.

To read the full commentary by the United States Department of Agriculture’s Economic Research Service, please click here. 

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The (Updated) Case for Free Trade

The long‐​standing bipartisan consensus in favor of free trade in the United States has unraveled as the nation’s commitment to the multilateral trading system is increasingly subordinated to inward‐​looking ideological priorities. Like all forms of market competition, trade can be disruptive for some companies and workers, and various trade agreements may require updating to address both an increasingly authoritarian China and the 21st‐​century global economy. Nevertheless, both the seen and unseen economic benefits that free trade has delivered to countless individuals, businesses, and communities in America are undeniable and irreplaceable. Furthermore, the lone alternative to free trade, protectionism, has repeatedly proven to impose high costs for minimal benefits. In short, the case for free trade is an economic no‐​brainer.

That case is not just grounded in economics. Free trade is a critical foreign policy tool that promotes peace and cooperation, and it remains a pillar of the liberal international order. Free trade is also moral: as Adam Smith observed, humans are “an animal that bargains,” unique in our ability to prosper through commerce. Government restrictions on these natural and voluntary transactions—whether across or within national borders—enrich a privileged few at the expense of all others, especially the poor. Trade also enriches and empowers the world’s poorest and most vulnerable people, especially women and children who once lived in unspeakable conditions.

Finally, China represents real challenges, but dealing with it does not warrant abandoning free trade. Instead, historical and recent evidence demonstrate that China’s economic threat to the United States has been exaggerated, that aggressive unilateralism will prove less effective in influencing the Chinese government’s behavior than multilateral engagement, and that the United States will be better positioned to respond to a rising China if it embraces the openness and confidence that made America an economic powerhouse.

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To read the full report from the CATO Institute, please click here. 

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Need Nickel? How Electrifying Transport and Chinese Investment are Playing Out in the Indonesian Archipelago

The success of the global march toward “decarbonization” depends on the complicated logistics that support it, along with the convoluted strategies that form its underpinning. The process of shoring up supply chains is a prerequisite to sound strategic planning: Without robust supply chains, even the most elaborate blueprint for implementation will prove ostentatious in practice. The global push for electrification, as worthy a cause as it may be, is not immune to such realities. Indeed, the global push to electrify is creating new tensions and complexities that, if not properly managed and mitigated, will undermine the much-discussed “energy transition.” Emerging markets and developing countries are central to the “decarb” and electrification push, and are themselves maneuvering to attain advanced country status and a higher quality of life for their citizens. Minerals and the materials derived from them are at the heart of energy transition strategies, and emerging markets and developing economies are the overwhelming providers. The industrialized world brushes these realities under the rug in favor of self-aggrandizing agenda-setting, and, in doing so, engenders critical supply risks and the potential for further environmental degradation.

Widely ignored, although gaining attention, is China’s strategic positioning as a crucial gatekeeper to several key “green” technologies, including battery energy storage to support electric vehicles (EVs)—specifically, battery electric vehicles (BEVs)—along with stationary storage for power grids. China also dominates in other technologies including wind and solar components, controls, sensors, and communications—a gamut of industrial equipment, including much that is pertinent for defense. BEV designs have come to dominate the energy transition strategies of many governments along with those of large automakers and startups, since BEVs are regarded as providing the maximum reduction in tailpipe emissions. Having little of its own capacity for manufacturing traditional vehicles, and being a large (and growing) net importer of oil, natural gas, and petroleum products, China’s government and business elites have emphasized EV designs and production.

China’s powerful model of economic soft power has crept into commodity warehouses, EV factories, and everything in between, granting Chinese entities significant control over several links of these critical supply chains. In an era of unparalleled geopolitical friction, how China’s dominance will affect emissions reduction goals in places like the United States and Europe remains to be seen. Reports of human rights abuses in Xinjian and the political status of Hong Kong and Taiwan are key issues that close the door for cooperation with China on climate change. Thus, the success of EVs, much less anything else in the energy transition hopper, cannot be divorced from the geopolitics of the day. China’s inordinate influence over natural resource-producing and -exporting countries could translate to leverage in its revisionist power plays.

Accompanying the vigorous drive toward alternative energy technologies is the unavoidable pressure on the global supply of critical base metals. Nickel is no exception. In our report and case study we examine tensions in nickel supply and value chains within the context of broad aspirations to electrify transport.

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To read the full report from Rice University’s Baker Institute for Public Policy, please click here. 

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WTO 2025: Restoring Binding Dispute Settlement

Binding dispute settlement—the ability to obtain a final judgment of whether a member of the World Trade Organization (WTO) has acted inconsistently with its obligations—was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO members, including the United States. For most WTO members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. This paper addresses how to reconstruct a system that the United States could join that would be broadly acceptable to others. It sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable again.

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The Political Logic of Reshoring in Low Carbon Technologies: Economic Interdependence and Green Industrial Policy

A core feature of the global economy over the last three decades has been the rise of offshoring and an increased use of outsourcing (Baldwin and Clark 2000). Offshoring—through which companies relocate stages of the supply chain to third-party countries—has been enabled by the rise of contract manufacturing, which itself is made possible by the digitalization of key stages of the production process. The same underlying processes have also enabled the increased use of outsourcing. Outsourcing generally describes the process in which stages of the supply chain that were previously incorporated within a single company structure are contracted outside the firm to third-party suppliers. Together, offshoring and outsourcing have come to be known as core features of globalization, and have led to the emergence of a complex web of global supply chains for many different products.

An important question arising in this context is what the implications of reshoring might be for the relative competitiveness of low carbon technology solutions to climate change and industrial upgrading. Although in some markets key technologies such as solar photovoltaics are competing on a non-subsidized basis with traditional fossil fuels, many markets remain policy driven. Data from REN21 (2020), for example, shows that subsidies such as feeding tariffs continue to be used in a large number of jurisdictions to support the deployment of renewable energy technologies. If locational choices—and choices about whether to return productive activities inside the firm, or to continue outsourcing to third-party providers—are determined by cost, then reshoring may lead to an increase in costs that could slow the deployment of low carbon technologies. The extent to which reshoring is occurring in low carbon sectors, therefore, is of immediate relevance to the global low carbon energy transition. It also affects whether supply chains in low carbon tech may continue to deliver economies of scale, high innovation rates, and steep cost declines for globally beneficial outcomes.

In this paper we focus on public policies aimed at altering clean technology supply chains and the extent to which these policies may impact the low carbon transition and upgrading . The first part of the paper provides the conceptual underpinning of the study. The second part of the paper examines the frequency with which reshoring initiatives are being implemented by governments in countries that are central to the global energy transition—China, the European Union, Japan, and the United States. We then examine key low carbon technologies and consider the extent to which they are vulnerable to reshoring activities. Whilst global supply chains govern the production of many key technologies of importance to climate change, the structure and complexity of these supply chains differ by technology. By extension, the vulnerability of global supply chains to efforts by national governments to encourage reshoring are different, depending on technology and associated supply chain characteristics. We examine the global organization of production for solar photovoltaic modules, wind turbines, and batteries to assess the relative vulnerability to reshoring activities. A final section concludes that any policies facilitating cost reduction in low carbon technologies is desirable from a climate perspective, even if bordering at reshoring. Such measures ideally yield both cost reduction in LTCs and domestic economic benefits. However, they can easily tilt towards less collectively beneficial outcomes. Given China’s central role in some clean tech supply chains, it is most exposed to such a scenario. We conclude with policy recommendations.

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To read the full report by the Social Science Research Network, please click here.

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China’s Common Prosperity Program: Causes, Challenges, and Implications

Introduced by Chinese President Xi Jinping at the beginning of 2021, “common prosperity” has become a defining theme of Chinese politics today, serving to set critical priorities for Beijing across economic, environmental, and social policy, at both the national and local levels. Focused largely on alleviating systemic inequalities, the common prosperity campaign has been described as a transformational new path for China’s development. Despite the central importance of common prosperity to the direction of Chinese policymaking, clarity on the concept remains limited outside of China. What exactly does common prosperity mean in practice, and what are the intentions and motivations of the political campaign being waged in its name? Where is the campaign headed, and will it be able to accomplish its goals? And, in particular, what will common prosperity mean for international non-profits and philanthropic organizations working in or with China on those areas central to the campaign?

China’s Common Prosperity Program: Causes, Challenges, and Implications, a new report by Asia Society Policy Institute (ASPI) Senior Fellow Guoguang Wu, examines these questions in detail. The paper finds that common prosperity is derived from a complex number of motivations, including reducing pressing inequalities, but also key political goals of interest to the Chinese party-state. The paper also identifies and examines a number of internal contradictions and challenges facing the common prosperity campaign, such as a continuing mismatch between common prosperity’s ambitious goals and the concrete measures that have so far been planned or implemented, and analyzes what steps would be required to rectify these issues moving forward.

 

The report devotes special focus to common prosperity’s impact on philanthropic and non-profit work, given the concept’s overlap with key areas of development frequently prioritized by the sector. The Chinese state has expressed significant interest in encouraging and expanding philanthropic activity as part of the goals of common prosperity. Beijing therefore may increasingly welcome the international philanthropic sector’s resources and expertise to meet these challenges. However, the Chinese state has also firmly telegraphed its intention to maintain strict control over the use of funds, the non-profit sector as a whole, and the participation of foreign organizations in particular. Examining these factors in detail, and highlighting the reality of both significant opportunities for impact and growing political obstacles to normal practice, this report illustrates the mix of challenges and opportunities likely to face the global philanthropic sector’s operations in China in the years ahead.

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To read the full report by the Asia Society Policy Institute, please click here.

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Testimony of U.S. Trade Representative Ambassador Katherine Tai Trade Policy Agenda Hearing, House Ways and Means Committee

Thank you, Chairman Neal, Ranking Member Brady and Members of the Committee. I appreciate the opportunity to be here today to discuss the President’s Trade Agenda.

President Biden believes that trade can be a force for good that grows the middle class and addresses inequality – if we get the rules right. To achieve those goals, trade must be grounded in fair competition, and workers should not have to compete against artificially low wages or unsafe working conditions. They should compete on the merits and today, I am pleased to update you on our path toward achieving those goals.

The President also believes we are at our strongest when we work closely with our partners and allies around the world. Over the last year, in coordination with my colleagues across the Biden Administration, we have worked to repair strained relationships and recommitted the United States to the world’s institutions. These renewed partnerships have been instrumental to the strong, united response to Russia’s unjustified attack on Ukraine.

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To read the full testimony, please click here.

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