What happened in trade policy in 2021? Amid the ongoing impacts of the pandemic, supply chain disruptions and closed borders, quite a lot. Here’s our take on the key trade policy developments in the region this year.
1. Broader ‘trade tool kits’. Most economies expanded the breadth of policy tools they are using to mitigate trade threats – tariffs; foreign investment controls; domestic support measures; regulatory controls on labour and environment; punitive enforcement measures; export controls – it’s a full policy plate. Next up, restrictions on outward investment.
2. The environmental good. In focus in 2021 were new industries for ‘green’ goods; new technologies for clean energy and new policies for emissions targets. Also evident were new (and old) barriers to trade. APEC is taking the lead in considering ways to reduce tariffs on environmental goods. Regulatory controls are the rising threat.
3. Pick your regional FTA. Trade agreements grew bigger and broader. The region embraced RCEP – it will begin next year – and lined up for CPTPP. The UK, China, Taiwan, Korea and potentially more (pick the missing economy) are now seeking accession. The ASEAN Australia and New Zealand FTA, the ASEAN Korea FTA and others are being upgraded. Will the Free Trade Area of the Asia Pacific (FTAAP) be back?
4. Rise of the trade ‘arrangement’. It’s not a treaty, it’s not an agreement, it’s a ….framework. As geopolitical tensions on trade increased, deals setting out frameworks for trade proliferated – on supply chains, steel, trade facilitation, semi-conductors, energy, digital trade; take your pick. Not binding commitments, but the bones on which to build better trade relationships.
5. Transposing to a new year. Exciting progress in the customs world as economies began the transition to the Harmonised System (HS) commodity code revision for 2022. Some old products like world globes and telephone answering machines are to lose their codes. New ones like electric vehicles will get their own. More work for officials. Potential changes to tariffs, rules of origin and market access.
6. China policy tensions. The US and China’s trade and economic relationship remained one of competitive decoupling. Both sides sharpened their domestic policy tools to grow their dominance of global tech, manufacturing and critical commodities. There were no breakthroughs in Australia/China trade tensions, and none seem in sight. It’s a rebalancing of risks in the new trade ‘normal’.
7. Knock-on effects: How do you solve a problem like urea? A redirection of China’s globally dominant urea production to domestic uses has sent shockwaves through agricultural and transport industries around the world. Without urea, there is no diesel additive AdBlue. Without AdBlue, the global truck fleet grinds to a halt, further compounding supply chain disruptions and igniting protectionist sentiment.
8. Diversification, diversification, diversification. New frameworks, new FTAs, new strategic partnerships – trade and investment everywhere is seeking new friends. Top of the wish list for most: Vietnam, Indonesia, India, South Asia and the Middle East. Paths for potential opportunities were complicated by geopolitics. ASEAN’s centrality in the region now takes on new importance.
9. New multilateralism. While the WTO cancelled its own conference, sparks of multilateral hope on trade emerged among ‘likeminded’ economies; on services domestic regulation, on industrial subsidies and on digital taxes and trade. The path forward? Plurilateral and diverging, but not hopeless. It’s a small world after all.
10. The real victims of supply chain disruption. As we head into the holiday period, spare a thought for the thousands of toy dolls still stranded in warehouses, unable to be shipped to reach children in time for Xmas. Locked down for months on end, trapped behind closed borders, unable to visit their loved ones. Can you imagine? LOL.
Wishing all our readers a happy holiday season and a prosperous new year.