Global trading system poised for a new normal (The Hindu)

Mains Paper 2: International Relations
Prelims level : World Trade Organisation
Mains level : Bilateral trade grouping and its affect India’s interest

Context:

• The tale of two events at two different points of time demonstrate unusual commonalities.
• One occurred in 2001, and another is about to take place on January 15.
• While the first event happened against the backdrop of the 9/11 terrorist attacks and the impending Iraq war, the second is about to unfold amidst escalating US-Iran tensions.
• In both events, the dramatis personae are the same: the US and China, the world’s two largest economies.

Protracted negotiations preceded:

• The US paved the way for China to join the World Trade Organisation (WTO) in 2001, after extracting a significant price by forcing Beijing to slash its tariffs on industrial and agricultural products to levels that industrialised countries took more than 200 years to bring down. China had also committed to reduce subsidies and other trade-promoting measures for industry and agriculture.
• Beijing had agreed to reduce its de minimis support for agriculture producers below what was allowed for developing countries.
• For almost 15 years, anti-dumping investigations against Chinese products were punitively high as they were treated as products originating from non-market economy. \
• China chose to pay the price to establish its presence in the global trading system.

US’ allegations:

• The US says China aggressively promotes 10 advanced manufacturing industries domestically “to replace foreign products with Chinese companies’ products in the China market through a variety of fair and unfair means, including through the extraction of foreign technologies,” according to a 2017 report to the US Congress by the Office of the US Trade Representative in January 2018.
• The continued ballooning of the US trade deficit which touched $648 billion in manufactured goods last year and the loss of five million jobs during the last 16 years demonstrates that multilateral, regional, and even bilateral trade agreements with Korea and others, have only brought de-industrialisation and destruction.
• In short, the US argues that ever increasing trade deficits are an offshoot of the manner in which it was duped, cheated, and deceived by its trade partners who refused to play by the rules governing the so-called “fair and free trade”.
• The new Sino-US normal attempts to cock a snook at the global trading system based on rules and comparative advantage.
• So, the trade war between the two largest economies in the world has almost paved the way for managed trade in which countries compete not on the basis of their comparative trading strengths but on sheer market and power-based equations.
• There will be several collateral causalities in the global trade because of this new normal.
• Countries like Australia, Brazil, Argentina, and other major farm producers will take a hit once orders from China dry up because of the purchase of American farm products.

Conclusion:

• There is no guarantee that trade relations between the two major powers will dramatically improve.
• Indeed, the trade war could continue for a considerable period of time.
• It is essentially a battle over who is going to be the hegemon and who is going to lead the fourth industrial revolution,” former South African trade minister Rob Davies told this columnist.

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Prelims Questions:

Q.1) With reference to the Mutual Legal Assistance Treaties, consider the following statements:
1. India has Mutual Legal Assistance Treaties, MLAT with 42 countries and is signatory to various International Conventions for cooperation in criminal matters and Union External Affairs Ministry is the designated central authority for the country.
2. Under the MLAT, a country can request for obtaining evidence for criminal investigations and prosecutions.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: B
Mains Questions:
Q.1) As US strives to strike a beneficial bilateral deal with China, it’s paving the way for ‘managed’ trade among countries. Elucidate the statement.