On Thursday, December 14, WITA hosted two panels to discuss changing attitudes toward trade in the 250 years since the Boston Tea Party; how trade policy has evolved since the founding of the Republic; where things are today on trade; where things are headed on trade; and the role of trade in U.S. global leadership.
Panel 1 Featured:
Elizabeth Baltzan, Senior Advisor, Office of the United States Trade Representative
Wendy Cutler, Vice President, Asia Society Policy Institute (ASPI), and Managing Director of the Washington, D.C. office; former Acting Deputy United States Trade Representative
Ambassador Donald Johnson, Director Emeritus, Dean Rusk Center for International Law and Policy, University of Georgia; former Chief Textile Negotiator, Office of the United States Trade Representative
Ambassador Susan Schwab, Strategic Advisor, Mayer Brown; former U.S. Trade Representative
Moderator: Edward Alden, Senior Fellow, Council on Foreign Relations and Ross Distinguished Visiting Professor, Western Washington University
On January 16-17, 2024, the WITA Academy will host a virtual Intensive Trade Seminar on the World Trade Organization. Ralph Ossa, the author of this piece, will be a featured speaker at the Seminar. Information can be found here and below.
Many people may be wondering how much of the current trade slowdown is due to trade fragmentation, possibly as a result of rising geopolitical tensions, and how much is due to tighter financial conditions as countries around the world raised interest rates to fight inflation. The report suggests that, while we do see initial signs of fragmentation, we do not see evidence of broad-based de-globalization.
For example, the share of intermediate goods in world trade, which provides an indication of the health and extent of global supply chains — a key indication of the extent of trade fragmentation — fell to 48.5 per cent in the first half of 2023, having averaged 51.0 per cent over the previous three years. While this suggests that supply chains may be contracting, it may also simply reflect higher commodity prices as these have a greater influence on the cost of intermediate goods than on final goods costs.
A possible indication of an increase in near-shoring is the recent decline in the share of Asian trading partners in US trade in parts and accessories, which is an important component of intermediate goods. However, while this share fell from 43 per cent in the first half of 2022 to 38 per cent in the first half of 2023, it remains close to the pre-pandemic (2019) share of 39 per cent.
Similarly, the share of politically like-minded trading partners (as measured by United Nations voting patterns) in US total trade recently rose to 77 per cent in the first half of 2023, from 74 per cent in the first half of 2022. Again, while this could signal increased friend-shoring, in fact the 2023 share is very close to the 2019 share of 77 per cent.
These findings are in line with the results we presented in the 2023 World Trade Report on 12 September 2023. While they do not yet suggest broad-based de-globalization, nevertheless, we will continue to monitor these trends carefully going forward.
It seems intuitive to think that if the distribution of political power shifts, law eventually follows, as new powers want political changes to ultimately be reflected in the law. However, established actors typically want the law to remain stable and therefore resist legal change. When and how are shifts in global power structure then brought into international law?
One of the greater shifts in geopolitics in recent history has been the rise of China, and it has put the international order under significant strain. The question this chapter will explore is to what extent this shift has resulted in change in international law, and especially in world trade law. The WTO has been a key arena of conflict between the US and China in recent years, well before the Trump years. What happens when a new, potentially powerful, (state) actor enters the scene of an already existing and established legal regime such as international trade law? How did China, whose international trade law profession was underdeveloped (or virtually non-existent) prior to its accession to the WTO, manage to use the WTO dispute settlement system to push for change.
International trade law is a particularly suitable field for an inquiry into the effects of geopolitical shifts on international law, because—especially in the form it found in the WTO Agreements—it is widely seen as a reflection of a particular economic vision associated with the dominant powers of the 1990s. The WTO Agreements tend towards neoliberal market liberalization, mainly due to pressure from the US and, to an extent, the European Union during the Uruguay Round. Developing countries challenged this dominance in the Doha Round and prevented the further extension of this approach through treaty-making, but they did not achieve a rebalancing on this route either as negotiations largely ended in gridlock. Meanwhile, societal contestation—particularly in the area of environmental regulation—has created legitimacy issues for the WTO, adding to the pressures the organization finds itself under, but has not led to formal changes in existing agreements either.
Yet, change in trade law does not necessarily have to come through state-led processes. In fact, this field of international law is particular not only because of its ideational orientation, but also because of the centrality of the ‘judicial’ path of change, embodied in the WTO dispute settlement system and the jurisprudence of the panels and the Appellate Body (AB). In light of the clogged nature of state or multilateral paths, the focus for change agents in this field soon shifted towards the judicial path, and it is here that we have seen most movement, especially under the influence of the AB from the mid-1990s until 2019, when the AB itself became blocked as the US prevented the appointment of new members. Change processes in world trade law over the past decades have then also largely come about through shifts in the interpretation by WTO dispute settlers.