THE INSTITUTE FOR INTERNATIONAL TRADE

A MESSAGE FROM THE DIRECTOR

Mr Trump may have exited the White House building in – by his standards – controversial fashion, but this year is nonetheless shaping up to be an interesting one for the international trade agenda.

As Visiting Fellow Milton Churche presaged in his IIT Policy Brief at the end of 2020, the Biden Administration will initially focus on domestic issues, but nonetheless will still have to figure out how to engage China, the EU, and key allies in relation to the World Trade Organization. Biden’s inward focus may entail more pain for trading partners, as the executive order to procure more locally presages. His outward focus will entail significant adjustments in the area of climate-related trade policies for Australia in particular, as we are already seeing redound in Australian Federal politics.

On the China front, incoming Biden Administration officials expressed disquiet that the European Union forged ahead with concluding its Comprehensive Agreement on Investment with China. National Security Advisor Jake Sullivan observed that the EU could have waited to coordinate China economic diplomacy with the US. However, as the European Council on Foreign Relations reported around the same time, given what happened on the US Capitol, Europeans are unsure what the future holds for US domestic politics, and therefore the US’s reliability on the international stage. Sobering issues for Australians to consider as we contemplate the future of our trade relations with China.

Uncertain US domestic politics partially explains the EU desire to complete the CAI. However, securing substantial new economic opportunities for EU businesses is the main motive, as Pascal Kerneis, Managing Director of the European Services Forum, argues in an exclusive feature article for IIT. This will presumably carry some weight in the forthcoming ratification debate in the EU Parliament, which is likely to be heated over claims the CAI is weak on labour standards.

Our second feature article on the CAI, by Bryan Mercurio Professor of Law at the Chinese University of Hong Kong, aims to provide perspective on both the claimed successes and failures of the agreement, usefully foregrounding what are likely to be the key flashpoints during ratification.

Moving on from the CAI, there will be other significant issues for the trading system to confront, and (optimistically) solve. Patrick Low, formerly WTO Chief Economist, canvasses the emerging battle lines concerning taxation of digital services. How this is resolved will have huge implications for tax regimes globally, as well as flows of digital services in particular. As he reports, the case for a multilateral agreement on these matters is strong.

Next, Visiting Fellow Ken Ash reflects on the growing importance of global food systems, a timely contribution given that the United Nations Food Systems Summit is now (virtually) underway.

Finally, we will continue providing cutting-edge analysis from leading trade thinkers throughout 2021. So watch this space.

Professor Peter Draper 

POLICY AND ENGAGEMENT

Trade and investment between the EU and China have increased dramatically in the last decade, but foreign direct investment to and from China from and to the EU seems to have declined in the last three years. China has become the EU’s biggest source of imports and has become the EU’s fastest growing export market, but their relationship in FDI is less prominent. The new CAI should open the way to allow more FDI both ways, with new opportunities for European services firms.

By Dr Pascal Kerneis, Managing Director of the European Services Forum, Brussels

On 30 December 2020, the European Union (EU) and China ‘in principle’ concluded negotiations on a Comprehensive Agreement on Investment (CAI). The European Commission published the text of the CAI on 22 January 2021. The agreement has been welcomed by the business community but criticised by civil society and the United States (US). This brief article does not attempt to analyse the entirety of the agreement but instead makes five points.

By Bryan Mercurio, Simon F.S. Li Professor of Law, Chinese University of Hong Kong

OUR PROGRAMS FOR 2021

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