William Krist's Blog, page 53

Selecting a New WTO Director-General: Implications for the Global Trading System

The United States and members of the World Trade Organization (WTO) are selecting new leadership for the WTO Secretariat, following Director-General (DG) Roberto Azevêdo’s unexpected resignation in August 2020, a year before his term’s end. Eight candidates were in the running, and WTO members narrowed the field to five in September after the first round of consultations. On October 8, Nigeria’s Ngozi Okonjo-Iweala and South Korea’s Yoo Myung-hee advanced after the second round as the top candidates with the “broadest and deepest support from the membership,” paving the way for the first woman to serve as WTO DG. The process requires all 164 WTO members to agree by consensus on the new DG appointment. WTO members and observers view the outcome of the DG race and fresh leadership as important to inject new momentum into the institution, amid efforts to salvage its relevance and chart a path forward. In the current race, analysts have variously called for an “honest broker” and dealmaker, politician over technocrat, or a “peacekeeper.” WTO leadership may be particularly critical at this juncture, given members’ divergent views over needed reforms and new rules, a nonfunctioning dispute settlement system, and a recent spike in unilateral trade actions, which threaten the organization’s legitimacy. The intensive selection process, usually lasting nine months, has been expedited to conclude possibly by early November following the U.S. presidential election.

The WTO and global trading system face significant challenges. The WTO’s credibility hinges on the conclusion of outstanding negotiations, set back by the postponement of the 2020 Ministerial Conference, due to the Coronavirus Disease 2019 (COVID-19) pandemic. Meanwhile, a dispute settlement crisis continues and broader WTO reforms remain under discussion, complicated by wide differences, growing trade disputes, and trade protectionism. In the near-term, WTO members face additional challenges in responding to the global trade and economic slowdown and spread of trade restrictions in response to COVID-19. In the words of the outgoing DG: “The challenges facing the work of this Organization will always be formidable — commensurate with its relevance and role as an anchor of predictability and certainty in a fast-changing global economy.”

Debate over the WTO’s future direction is of interest to Congress. Some Members have expressed support for ongoing WTO reform efforts (H.Res. 746) and advocated for an active U.S. leadership role (S.Res. 651). In May, Senator Hawley and Representatives DeFazio and Pallone introduced joint resolutions (S.J.Res. 71, H.J.Res. 89) proposing to withdraw congressional approval of WTO agreements; rule changes are likely to prevent votes from occurring on the measures.

IN11463

Cathleen D. Cimino-Isaacs is an analyst in International Trade and Finance at the Congressional Research Service. 

To read the full report, click here. 

COVID-19: China Medical Supply Chains and Broader Trade Issues

The outbreak of Coronavirus Disease 2019 (COVID-19), first in China, and then globally, including in the United States, is drawing attention to the ways in which the U.S. economy depends on manufacturing and supply chains based in China. This report aims to assess current developments and identify immediate and longer range China trade issues for Congress.

An area of particular concern to Congress is U.S. shortages in medical supplies— including personal protective equipment (PPE) and pharmaceuticals—as the United States steps up efforts to contain COVID-19 with limited domestic stockpiles and insufficient U.S. industrial capacity. Because of China’s role as a global supplier of PPE, medical devices, antibiotics, and active pharmaceutical ingredients, reduced exports from China have led to shortages of critical medical supplies in the United States. Exacerbating the situation, in early February 2020, the Chinese government nationalized control of the production and distribution of medical supplies in China—directing all production for domestic use—and directed the bureaucracy and Chinese industry to secure supplies from the global market. Once past the initial peak of its COVID-19 outbreak, the Chinese government appears to have prioritized certain countries and selectively released some medical supplies for overseas delivery.

Congress has enacted legislation to better understand and address U.S. medical supply chain dependencies, including P.L. 116-136, The Coronavirus Aid, Relief, and Economic Security (CARES) Act, that includes several provisions to:

expand drug shortage reporting requirements; 
require certain drug manufacturers to draw up risk management plans; 
require the U.S. Food and Drug Administration (FDA) to maintain a public list of medical devices that are determined to be in shortage; and 
direct the National Academies of Science, Engineering, and Medicine to conduct a study of pharmaceutical supply chain security.

Other potential considerations for Congress include whether and how to further incentivize additional production of health supplies, diversify production, address other supply chain dependencies (e.g., microelectronics), fill information and data gaps, and promote U.S. leadership on global health and trade issues.

The crisis that merged for the U.S. economy is defined, in large part, by a collapse of critical supply, as well as a sharp downturn in demand, first in China and now in the United States and globally. As China’s manufacturing sector recovers, while the United States and other major global markets are grappling with COVID-19, some fear China could overwhelm overseas markets, as it ramps up export-led growth to compensate for the sharp downturn of exports in the first quarter of 2020, secure hard currency, and boost economic growth. China may also seek to make gains in strategic sectors—such as telecommunications, microelectronics, and semiconductors—in which the government undertook extraordinary measures to sustain research and development and manufacturing during the COVID-19 outbreak in China.

R46304

Karen M. Sutter is the Coordinator Specialist in Asian Trade and Finance at the Congressional Research Service.

Michael D. Sutherland is an analyst in International Trade and Finance at the Congressional Research Service.

Andres B. Schwarzenberg is an analyst in International Trade and Financeat the Congressional Research Service.

To read the full report, click here.

Trade Profiles 2020

Trade Profiles contain detailed information on merchandise trade flows, including top products traded by each economy, an expanded section on trade in commercial services, as well as statistics on intellectual property. The information, available for WTO members, observers, and other selected economies, is derived from multiple domains, such as customs statistics, national accounts, Balance of Payments statistics, Foreign Affiliates Statistics (FATS), and industrial property statistics. Data are sourced from WTO Secretariat and external sources and presented in standardized and visualized format for quick reference.

I. The first section provides a snapshot of the importance of trade in the economy – the economy’s ranking in world merchandise trade and trade in commercial services.

II. The second section is dedicated to Merchandise Trade indicators (customs-based statistics) – information on total trade flows broken down by broad product category and major origins and destinations. This section provides statistics on top exported and imported agricultural and nonagricultural products at the HS 4-digit level according to the definitions of the WTO Agreement on Agriculture and WTO Non-Agricultural Market Access (NAMA products).

III. The third section deals with Trade in Commercial Services – information on total trade flows (Balance of Payments based statistics) broken down by main service item and major origins and destinations. It also contains information on inward and outward FATS sales. This section provides detailed trade statistics for transport, including its breakdown by mode of transport, travel, other commercial services and goodsrelated services.

IV. The fourth and last section covers Industrial Property Indicators – annual number of applications for patents, trademarks, and industrial designs in the name of residents and non-residents of the reporting economy.

To download the full report, please click here.

trade_profiles20_e

Published by the World Trade Organization

© World Trade Organization 2020

U.S. Exports Fact Sheet (August 2020)

The Trade Partnership publishes monthly U.S. export data highlighting trends for national goods and services exports and state and congressional district goods exports. Data include top exports, top sectors, top countries, and export changes.

Click here to go to previous versions of this report.

To download the full report, please click here. 

Monthly-Export-Fact-Sheet-August-2020

Copyright @2020 The Trade Partnership / Trade Partnership Worldwide, LLC. All right reserved.

U.S.-U.K. Free Trade Agreement: Opportunities and Challenges for Washington State

In both the leadup to negotiations and the talks surrounding a potential agreement, digital services are a significant issue and a growth opportunity in the evolution of the US-UK relationship. Washington state’s status as a global hub of technology and innovation makes it well suited to benefit from global digital trade growth. E-commerce companies of all shapes and sizes in Washington state are increasingly using technology to connect with new customers worldwide. The tech sector is a significant driver of the state’s economy, promoting job growth, exports, and wealth generation. In 2018, there were roughly 247,700 workers employed in information, communication, and technology (ICT) jobs in Washington state. The opportunities for all Washingtonians of a growing and thriving digital economy brings added importance to the digital chapter of a US-UK FTA. The US and the UK are the world’s leading exporters of digitally delivered services and digital innovation; the United Kingdom takes in 23 percent of US digitally deliverable services exports. They are also each other’s largest e-commerce markets.

Computer software, as well as computer and data services, made up more than $620 million in exports from Washington state to the UK in 2017. 4 These segments have grown substantially in the last few years, and the US and the UK are among each other’s largest e-commerce markets. Current trade negotiations may present an opportunity for the UK to align its privacy standards more closely to those in the US, although the UK government has stated that it will continue to follow the EU General Data Protection Regulation as it stands. 

The leadup to trade negotiations hit a snag when the UK passed a 2% digital services tax in 2018. The tax went into effect in April 2020 and applies to firms with global sales of more than $624 million (£500 million) and over $31.7 million (£25m) in the UK. US officials have criticized the tax as largely targeting American firms. Digital trade is a major focus of the UK’s negotiating objectives, and the US is using current talks to push for the tax’s repeal.

This new flexibility to adopt US standards may also apply to food regulations. This is a difficult issue for the UK government, which must balance reducing tariffs with the interests of domestic farmers and consumers. The EU also has stricter guidelines on genetically modified food products. Changing these restrictions could increase access for Washington farmers. A major question that will be addressed in these negotiations is the extent of the UK’s market reorientation away from the European Union, with the potential of greater alignment and harmonization of standards and regulations between the two nations. The extent to which the United Kingdom retains its current European food standards or makes a decisive shift to acceptance of US standards could impact US and Washington state agriculture trade with the UK.

This longstanding European approach to regulatory issues, including food safety regulations and technical barriers to trade, has impacted agricultural trade between the US and Europe. Many US agriculture interests including farmers and ranchers in Washington state, have historically felt their input has been marginalized in regulatory discussions and decisions with the hope that this will not be the case in the US-UK negotiations.

Trade barriers and transportation costs have also impacted agriculture trade between Europe and the US and efforts to remove barriers and create a level playing field for Washington farmers and ranchers will impact some Washington state commodities more than others.

Washington state fruits and vegetables, including potatoes, apples, cherries and pears, are currently impacted by European tariffs. Removing these barriers through a US-UK FTA can potentially create new opportunities for Washington state exporters. For example, the total value of Washington apple exports to the EU in 2019 was $1,270,864 with the UK accounting for almost all of that. Beyond fruits and vegetables, the US exports over $1 billion worth of fish and seafood products to the EU each year, with Washington state second only to Alaska with $302 million in exports. The UK was the leading market for Washington seafood products last year ($50 million.) The US wine industry, in which Washington state is a leading producer, also faces EU tariffs on imported wine and is another potential growth area with a new trade accord.

WCIT-UK-FTA-Study-2

To download the full report, please click here.

TikTok: Technology Overview and Issues

TikTok is a globally popular video-sharing smartphone application (app) owned by ByteDance Ltd., a privately held company headquartered in Beijing, China. It is under increasing scrutiny by the U.S. government as a potential privacy and security risk to U.S. citizens. This is because ByteDance, like all technology companies doing business in China, is subject to Chinese laws that require companies operating in the country to turn over user data when asked to by the government. Researchers differ over how TikTok’s collection of user data compares with other social media apps and whether TikTok poses a unique threat to the privacy and security of its U.S. users.

TikTok launched in the United States in August 2018. The app is available in over 155 countries in 39 languages and has approximately 800 million monthly active users. In the United States, the app has approximately 49 million monthly active users. TikTok’s appeal lies heavily on what has been called its “addictive” video feed, For You. The app builds this feed through a “recommendation engine” algorithm built on artificial intelligence (AI) technologies and data mining practices. According to the company, the recommendation engine relies on a complex set of weighted factors to recommend content, including hashtags and videos watched previously, as well as the kind of device a person is using. TikTok critics cite problems with how much data TikTok collects from and about its users and with how that data is stored—and could be shared.

On August 6, 2020, President Trump signed an Executive Order aimed at stopping TikTok from doing business in the United States. Once in effect on September 27, 2020 (an extension from the original date of September 20), the order will prohibit any U.S. company or person from “transacting” with ByteDance. On August 14, 2020, the President issued a second Executive Order stating that ByteDance, its subsidiaries, and partners must divest from all assets that support TikTok’s operations in the United States and destroy all previously collected U.S. user data. Divestiture may be accomplished by finding a U.S. buyer for TikTok. The requirements are designed to limit the Chinese government’s access to current and future data from U.S. TikTok users. ByteDance does not want to divest from TikTok and has sued the Trump Administration.

On September 14, 2020, Oracle announced that it had reached an agreement with ByteDance to “serve as [the company’s] trusted technology provider” in the United States. Treasury Secretary Steven Mnuchin announced that he had received the proposal. From the terminology used, it appears that the deal may involve a partnership between the two companies rather than a sale. This arrangement would keep the source code of the For You recommendation engine in the hands of ByteDance. It is unclear if this deal satisfies the conditions in President Trump’s Executive Orders. Secretary Mnuchin said that the Committee on Foreign Investment in the United States will review the proposal and present President Trump with its opinion. On September 19, 2020, Oracle announced that Walmart would be joining the TikTok acquisition.

On September 27, 2020, Judge Carl J. Nichols of the United States District Court for the District of Columbia granted a preliminary injunction against the Trump administration order. He stated that while President Trump has broad authority to prohibit business transactions with foreign entities that are deemed to pose a national security risk, TikTok appears to be exempt from such a prohibition because it is a personal communication service, which is protected by the International Emergency Economic Powers Act. The ruling does not affect the November 12, 2020, deadline that ByteDance divest from TikTok in the United States.

Some believe TikTok and other Chinese-owned apps pose a serious security risk to the United States because Chinese companies are subject to China’s laws that require compliance with government requests for data. Others believe that TikTok has fallen into “the crosshairs of a global technology battle” based on technology trade protectionism (this concept, also called “techno-nationalism,” refers to a country’s refusal or reluctance to import other countries’ advanced technology, as well as to export, or to allow other nations to benefit from, its own advanced technology).

Similar situations may arise in the future with other apps created by foreign companies. Options that Congress may consider include (1) developing an overarching legal and regulatory framework to protect the security and privacy of U.S. citizens’ data and communications, and (2) developing a uniform, transparent process to assess and mediate risks posed by foreign apps.

R46543

 

Patricia Moloney Figliola is a Specialist in Internet and Telecommunications Policy at the Congressional Research Service.

 

To download the full report, please click here.

 

Trade and American Jobs The Impact of Trade on U.S. and State-Level Employment: 2020 Update

Executive Summary

As the global pandemic took hold around the world at the beginning of 2020, economic growth, global trade, and national employment collapsed. Declines in demand and economic growth are triggering a stall in trade; the stall in trade is boomeranging back to further slow economic growth. This cycle results in lost American jobs that depend on trade. Restoring trade, for example with policies that support the free and fair exchange of goods and services, can help more Americans get back to work and accelerate a U.S. economic recovery. To spur hiring dependent on trade, it is important to understand first how important trade is to economies and jobs under “normal” circumstances. This report reviews the data of these benefits for U.S. workers before the global pandemic took hold. By looking at this relationship prior to the pandemic, one can better appreciate what has been lost and see the importance of adopting trade-enhancing policies that will help American workers, farmers, and families get back on their feet through the pandemic and beyond.

Based on the latest available data for this assessment (2018) and taking into account both the gains and the losses (i.e., a net estimate), trade supported over 40 million U.S. jobs in 2018. One in every five U.S. jobs was linked to exports and imports of goods and services. Two times as many jobs were supported by trade in 2018 as in 1992 – before the accelerated wave of trade liberalization that began with the implementation of the North American Free Trade Agreement (NAFTA) in 1994 – when our earlier research found that trade supported 14.5 million net jobs, or one in every ten U.S. jobs.

• U.S. trade – both exports and imports – has grown over the past two decades, caused in part by trade liberalizing international agreements as well as increasing demand, purchasing power, and growth outside the U.S. This led to the growth of the number of U.S. jobs tied to trade. Indeed, trade-dependent U.S. jobs grew four times as fast as U.S. jobs generally.

• Every U.S. state realized net employment gains directly attributable to trade in 2018. • Trade had a positive net impact on U.S. jobs in both the services and manufacturing sectors.

• U.S. trade with our North American partners, as well as with Europe, Japan, Korea, China, and India, among others, accounted for important shares of this trade related employment. In 2018, trade with Canada supported, on net, 7.8 million jobs; Mexico, 5.0 million jobs; European Union (27), 6.2 million jobs; 3 China, 7.7 million jobs; Japan, 2.0 million jobs; and Korea, the UK and India, each over 1 million jobs.

In 2018, tens of millions of American jobs and U.S. economic growth depended on trade. Today, as the United States faces dual public health and economic crises, trade can be a critical driver of job restoration and economic recovery

Trade_and_American_Jobs_2020

Laura M. Baughman is President of Trade Partnership Worldwide, LLC (TPW, www.tradepartnership.com).

Dr. Joseph Francois is Managing Director of Trade Partnership Worldwide, LLC, and Professor of Economics, University of Bern, Department of Economics and Managing Director, World Trade Institute.

To read the full repot, click here. 

U.S. Role in the World: Background and Issues for Congress

The U.S. role in the world refers to the overall character, purpose, or direction of U.S. participation in international affairs and the country’s overall relationship to the rest of the world. The U.S. role in the world can be viewed as establishing the overall context or framework for U.S. policymakers for developing, implementing, and measuring the success of U.S. policies and actions on specific international issues, and for foreign countries or other observers for interpreting and understanding U.S. actions on the world stage.

While descriptions of the traditional U.S. role in the world since the end of World War II vary in their specifics, it can be described in general terms as consisting of four key elements: global leadership; defense and promotion of the liberal international order; defense and promotion of freedom, democracy, and human rights; and prevention of the emergence of regional hegemons in Eurasia.

The issue for Congress is whether the U.S. role in the world has changed, and if so, what implications this might have for the United States and the world. A change in the U.S. role could have significant and even profound effects on U.S. security, freedom, and prosperity. It could significantly affect U.S. policy in areas such as relations with allies and other countries, defense plans and programs, trade and international finance, foreign assistance, and human rights.

Some observers, particularly critics of the Trump Administration, argue that under the Trump Administration, the United States has substantially changed the U.S. role in the world. Other observers, particularly supporters of the Trump Administration, while acknowledging that the Trump Administration has changed U.S. foreign policy in a number of areas compared to policies pursued by the Obama Administration, argue that under the Trump Administration, there has been less change and more continuity regarding the U.S. role in the world.

Some observers who assess that the United States under the Trump Administration has substantially changed the U.S. role in the world—particularly critics of the Trump Administration, and also some who were critical of the Obama Administration—view the implications of that change as undesirable. They view the change as an unnecessary retreat from U.S. global leadership and a gratuitous discarding of long-held U.S. values, and judge it to be an unforced error of immense proportions—a needless and self-defeating squandering of something of great value to the United States that the United States had worked to build and maintain for 70 years.

Other observers who assess that there has been a change in the U.S. role in the world in recent years—particularly supporters of the Trump Administration, but also some observers who were arguing even prior to the Trump Administration in favor of a more restrained U.S. role in the world—view the change in the U.S. role, or at least certain aspects of it, as helpful for responding to changed U.S. and global circumstances and for defending U.S. values and interests, particularly in terms of adjusting the U.S. role to one that is more realistic regarding what the United States can accomplish, enhancing deterrence of potential regional aggression by making potential U.S. actions less predictable to potential adversaries, reestablishing respect for national sovereignty as a guidepost for U.S. foreign policy and for organizing international affairs, and encouraging U.S. allies and security partners in Eurasia to do more to defend themselves.

Congress’s decisions regarding the U.S. role in the world could have significant implications for numerous policies, plans, programs, and budgets, and for the role of Congress relative to that of the executive branch in U.S. foreign policymaking.

To download the full report, please click here.

R44891

The World Bank Annual Report 2020

The COVID-19 pandemic presented countries with unprecedented challenges this year, requiring them to respond quickly to major disruptions in health care, economic activity, and livelihoods. The World Bank Group has been at the forefront of that response, mobilizing rapidly to deliver much-needed support to countries to provide critical supplies, reduce loss of life and economic hardship, protect hardearned development gains, and deliver on our mission of reducing poverty and boosting shared prosperity. Our goal in all these efforts is to improve conditions, both immediate and long-term, for the poorest and most vulnerable populations.

At the onset of COVID-19, the Bank Group took broad, decisive action in delivering a fast-track facility to help countries respond quickly to this crisis. We expect to deploy up to $160 billion in the 15 months ending June 30, 2021, through new operations and the restructuring of existing ones to help countries address the wide range of needs arising from the pandemic. This will include over $50 billion of IDA resources on grant and highly concessional terms.

By May, we reached the milestone of emergency health operations in 100 countries. Our initial projects focused on limiting the pandemic’s spread and boosting the capacity of health services. We helped countries access essential medical supplies and equipment through support for procurement and logistics, including negotiations with suppliers on their behalf. Many developing countries are dependent on imports for supplies, making them highly exposed to price fluctuations and trade restrictions. Through IFC and MIGA, we provided vital working capital and trade finance for the private sector in developing countries, particularly firms in core industries, and helped financial sectors continue lending to viable local businesses.

In March, the World Bank and IMF called for official bilateral creditors to suspend debt payments from IDA countries. In April, G20 leaders issued a historic agreement suspending official bilateral debt service payments from May 1 through the end of 2020 and called for comparable treatment by commercial creditors— a powerful example of international cooperation to help the poorest countries. Beyond immediate health concerns, the Bank Group is supporting countries as they reopen their economies, restore jobs and services, and pave the pathway to a sustainable recovery. Many of our client countries have enhanced their transparency and attractiveness to new investment with fuller disclosure of their public sector’s financial commitments. The Bank is helping the most vulnerable countries evaluate their debt sustainability and transparency, which are both essential to good development outcomes.

The Bank Group is supporting countries’ efforts to scale up their social safety nets. This includes cash transfer operations through both in-person and digital options so that governments can efficiently deliver this critical support to their most vulnerable people. We are also engaging with governments to eliminate or redirect costly and environmentally harmful fuel subsidies and reduce trade barriers for food and medical supplies.

In fiscal 2020, IBRD’s net commitments rose to $28 billion, while disbursements remained strong. IDA’s net commitments were $30.4 billion, 39 percent higher than the previous year. The 19th replenishment of IDA was approved in March, securing a three-year $82 billion financing package for the world’s 76 poorest countries. This will increase our support to countries affected by fragility, conflict, and violence (FCV) and strengthen debt transparency and sustainable borrowing practices. Over the last year, we realigned the Bank’s staff and management to drive coordinated country programs and put high-quality knowledge at the center of our operations and development policy. We are increasing our global footprint to be closer to our operations on the ground. We also strengthened our focus on Africa by creating

two Bank vice presidencies, one focusing on Western and Central Africa and the other on Eastern and Southern Africa, to take effect in fiscal 2021. I appointed four new senior leaders: Anshula Kant as Managing Director and Chief Financial Officer, Mari Pangestu as Managing Director of Development Policy and Partnerships, Hiroshi Matano as Executive Vice President of MIGA, and Axel van Trotsenburg as Managing Director of Operations on the departure of Kristalina Georgieva to head the IMF. In addition to these appointments, there were 12 vice-presidential appointments or reassignments over the last year. Together, the strong leadership team and a highly dedicated and motivated staff are striving to build the world’s most effective development institution, with a resilient and responsive business model that can help each country and region achieve better development outcomes.

At our Annual Meetings in October, we presented a new index to track learning poverty—the percentage of 10-year-olds who cannot read and understand a basic story. Reducing learning poverty will require comprehensive reforms, but the payoff—equipping children with the skills they need to succeed and achieve their potential as adults—is vital for development.

By helping countries leverage new digital technologies, we are expanding access to low-cost financial transactions, particularly for women and other vulnerable groups. Digital connectivity is one of many key steps in helping women unleash their full economic potential. The Women Entrepreneurs Finance Initiative (We-Fi), hosted by the Bank Group, works to remove regulatory and legal barriers that women face and help them gain access to the financing, markets, and networks they need to succeed. Bank operations also focus on providing women with greater agency and voice in their communities, working to ensure that girls can learn effectively and safely in schools, and promoting quality health care for mothers and children.

We help countries strengthen their private sectors, which are central to creating jobs and boosting economic growth. In fiscal 2020, IFC’s long-term finance commitments increased to $22 billion, which includes $11 billion of its own commitments and $11 billion in mobilization, commitments from private investors, and others. In addition, IFC extended $6.5 billion in short-term finance. MIGA’s commitments totaled $4 billion, with an average project size of $84 million. Looking forward, MIGA’s product line, staffing, and upstream efforts are well suited to help in the Bank Group’s COVID-19 response, including a focus on smaller projects in IDA-eligible countries and countries affected by FCV.

None of these achievements would have been possible without our staff’s hard work and successful adjustment to home-based work during the pandemic. Working around the world and at all levels, staff continued to deliver solutions to address countries’ most urgent needs. I am deeply grateful for their dedication and flexibility, especially amid these difficult circumstances.

As people in developing countries worldwide grapple with the pandemic and deep recessions, the World Bank Group remains committed to their future, providing the support and assistance they need to overcome this crisis, and achieve a sustainable and inclusive recovery.

DAVID MALPASS

President of the World Bank Group  and Chairman of the Board of Executive Directors

To download the full report, please click here.

9781464816192

World Bank. 2020. World Bank Annual Report 2020. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1619-2 . License: Creative Commons Attribution–NonCommercial–NoDerivatives 3.0 IGO (CC BY-NC-ND 3.0 IGO).

Reengaging the Asia-Pacific on Trade: A TPP Roadmap for the Next U.S. Administration

IN THE AFTERMATH OF A PRESIDENTIAL ELECTION, it’s not unusual for an incoming administration to revisit policy choices made by the previous administration or, in the case of reelection, during the first term. One decision that strongly merits another look after November is the U.S. withdrawal from the Trans-Pacific Partnership (TPP), a regional trade agreement that the United States signed with 11 other countries in 2016. In addition to eliminating tariffs, the TPP established high-standard rules in areas critical to the global economy, such as e-commerce, intellectual property protection, state-owned enterprises, labor, and the environment, promoting an alternative economic model to state-led capitalism in the region.

In recent years, the case for U.S. participation in the TPP has only become more compelling as the political and economic importance of the Asia-Pacific region has grown and concerns about Beijing’s economic model have mounted. East Asia is bouncing back from the COVID-19 pandemic before the rest of the world, and deepening economic ties with the engines of global growth will be an even more valuable proposition in the midst of a deep recession. Moreover, the pandemic has revealed serious vulnerabilities in supply chain networks, and the common standards and rules of the TPP can serve as the basis for establishing trusted supply chains in the region. But is there a path for the United States to return to the TPP or to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the 11 remaining countries finalized without the United States?

This report examines four options that the next administration would have for reengaging the CPTPP countries on trade: returning to the original TPP agreement, formally acceding to the CPTPP, seeking a broader renegotiation with the CPTPP as a baseline, or working on a narrower sectoral deal as an immediate, interim step. It then assesses the feasibility of each option based on domestic considerations and developments, as well as input from the CPTPP countries.

Domestically, a policy window may be opening for CPTPP reentry. Whereas trade was seen as toxic only four years ago, recent polls have found growing bipartisan public support for trade. At the same time, however, the views of the political parties on trade appear to be shifting. Some observers have gone so far as to suggest that the United States is on the precipice of a new trade order, with Republicans more protectionist and Democrats friendlier toward trade. This makes the domestic landscape and the outcome of a congressional trade vote uncertain. The strong bipartisan congressional vote in favor of the United States-Mexico-Canada Agreement (USMCA) led many to conclude that this agreement should be the new U.S. template for trade agreements. However, there may be factors unique to the USMCA that would not be in play in a negotiation with Asian countries. Another complicating factor is the fate of Trade Promotion Authority, set to expire in July 2021, which is a prerequisite for negotiations in the view of U.S. trading partners.

The prospect of CPTPP reentry also depends on the extent to which its members would be open to revisions proposed by the United States. To take the temperature of capitals in Asia, the Asia Society Policy Institute spoke with a dozen current and former trade officials from a diverse set of CPTPP countries. Those interviewed unanimously affirmed that they would welcome the United States back, but not at any cost. They are wary of being asked to make extensive revisions, having been scarred by the U.S. withdrawal after expending significant political capital during the TPP negotiations. Those countries  were accustomed to the uncertainties of the congressional approval process, but they now also worry about the presidential election cycle.

With the foregoing considerations in mind, the report offers a road map for the next administration to reengage with the CPTPP countries. Recommended steps include the following:

Launch an interim sectoral agreement: As a first step, pursue a limited, sector-specific Asia-Pacific trade deal with the CPTPP members, and perhaps other countries, to set high standards, rebuild trust, and build momentum. Promising topics include:


Digital trade, an area that represents more and more of overall trade, particularly now that the COVID-19 pandemic has accelerated the digitalization of the global economy.
Trade in medical and other essential products, a sector in which COVID-19 has focused attention on trade restrictions and vulnerabilities in global supply chains.
Trade and the environment/climate, which may be of particular interest to a Democratic White House.


Invest in competitiveness and adjustment at home: Build support for trade agreements generally and the CPTPP specifically at home by investing in competitiveness and adjustment policies and programs. Doing so would take the pressure off trade agreements to achieve goals they are not designed to tackle, such as ensuring more equitable income distribution.
Make the case for trade: Explain to the American public that deeper U.S. trade engagement with Asia-Pacific partners is integral to building an alternative economic model to Chinese state capitalism, diversifying U.S. trade beyond China and, ideally, promoting reforms within China.
Prioritize negotiating proposals: Develop and prioritize concrete proposals for U.S. reengagement with the CPTPP based on input from business, labor, and civil society groups throughout the country, as well as Congress.
Consult with trading partners: Consult with the CPTPP members to understand their limits, priorities, and concerns around U.S. reengagement.

These steps would pave the way for U.S. reentry into the CPTPP. Even then, CPTPP reengagement would be a heavy lift that would require flexibility and creativity from both the United States and the CPTPP countries. Returning to the original TPP by signing on to a five-year-old agreement that faced considerable opposition at home is not a realistic proposition in 2021. The approach with the best odds of success would likely fall between formal CPTPP accession and a more extensive renegotiation. For that to work, the United States would need to focus on the most important changes and modernizations needed, while the CPTPP countries would need to be more open to changes than during a typical accession.

Given the domestic and international challenges outlined in this report, it is understandable that many would question whether returning to the CPTPP is worth all the trouble. Despite those concerns, rejoining the CPTPP is one of the most impactful ways in which the United States can work with likeminded countries in the region to promote an alternative economic model to state-led capitalism and help shape the economic future of a region that is increasingly the engine of global growth and innovation.

A TPP Roadmap for the Next U.S. Administration

Wendy Cutler is the Vice President and Managing Director of Washington DC Office of the Asia Society Policy Institute and former Deputy USTR.

To download the full report, please click here.