1) how will China assess the new strategic chessboard? 2) is ASEAN ready for primetime? 3) can the US and the EU save their marriage? By Stephen Olson, Hinrich Foundation
From growing concerns over China's impact to the spilling over of climate policy into the trade realm, a fundamental remake of the trade landscape not experienced in decades is now unfolding. Three questions will drive trade in 2023.
At the start of what promises to be another tumultuous year in international trade, let’s be honest about how much we don’t know. Several underlying tectonic plates have only just begun to rumble and shift. They will fundamentally remake the trade landscape to an extent not experienced in decades, in ways that cannot be fully foreseen today.
Consider the shockwaves currently reverberating through the system: The benign and welcoming attitude towards China’s initial entry into the global trade system is being replaced by growing concerns over China’s impact and intentions. Faith in “free” trade has been battered by the undesirable social and economic outcomes that have accompanied the benefits it has produced. This trend has been exacerbated by acute trade vulnerabilities revealed through the pandemic and the war in Ukraine.
Intensifying geopolitical rivalries mean that trade is no longer just about trade. It will be shaped, and in many instances constrained, by geopolitical considerations. The central role technology plays in both economic and military preeminence creates a rationale for expanding layers of trade and investment restriction. The US embrace of industrial policy will tilt investment and production decisions in ways that will likely hurt partners. The need to address climate change is already messily spilling over into the trade realm and the term “climate tariffs” has now entered the trade lexicon. At a time when global trade governance has never been more important, the system is barely functional.
In the new era now unfolding, trade outcomes will be increasingly shaped by government interventions, principally in the form of trade restrictions, subsidization, exclusionary preferential trade blocs, and a playing field tilted in favor of domestic production.
Trade rules and previous norms of “good” behavior will be observed only when convenient. The post-war spirit of cooperation in trade and commitment to the commonweal has largely collapsed, increasingly replaced by unapologetic domestic-centric trade policies pursued irrespective of collateral damage on partners or the wider system