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What we are reading

Navigating trade rules and tools in a complex world

Published 04 May 2022

Is the technology sector increasingly fraught with geopolitics? How are lockdowns in China crippling supply chains? Will the US pare down its China tariffs? Is US economic engagement in Asia too little and too late? Find out about more developments in trade in What we are reading, our list of reports and analyses on global trade.

Semiconductors, sanctions, and supply chain resiliency

Technology ecosystems, particularly for critical inputs like semiconductors are increasingly caught in geopolitical tensions. The strategy and policy framework for US-China technology decoupling is examined by Jon Bateman of the Carnegie Endowment for International Peace.  The Economist explains if the US planning to cut China’s access to key chip-making tools. Meanwhile, the Wire China explores Intel’s shifting role in chip fabrication.

As economies around the world scrutinize their critical supply chains, Michael Gasiorek of the UK Trade Policy Observatory cautions against using “resiliency” to justify protectionist measures. Lastly, the Wire China walks us through the US sanctions regime as sanctions take center stage as a tool for decoupling in trade and technology.

Mentioned Publications

  1. U.S.-China Technological “Decoupling”: A Strategy and Policy Framework – Jon Bateman, Carnegie Endowment for International Peace, 25 April 2022
    As the US and China decouple their technology ecosystems, what policies and practices should the US government adopt to best guide or encourage the process?
  2. America has a plan to throttle Chinese chipmakers - The Economist, 30 April 2022
    The US is trying to maintain market share for its semiconductor toolmakers in the world’s largest market and slow China’s advance in producing high-tech chips.
  3. The Chip Champion? - Katrina Northrop, The Wire China, 24 April 2022
    How does Intel’s corporate journey reflect the state of global semiconductor trade? Why is high-tech chip fabrication concentrated in Asia?
  4. Supply Chain Resilience: The Dangers of ‘Pick n Mix’ - Michael Gasiorek, UK Trade Policy Observatory, April 2022
    In pursuing supply chain resilience, are economies using trade tools to address a genuine concern, or might they be invoking resilience as a cover for protectionism?
  5. Making Sense of Sanctions – Eliot Chen, The Wire China, 24 April 2022
    Using US sanctions on China as an example, the article lays out the US sanctions regime, including the key agencies that administer sanctions and a primer on how sanctions work in practice.

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Tariffs and other policies roil global markets

China is adopting policies to protect its citizens from Covid outbreaks and its farmers from high fertilizer prices and low pork prices. As a result, markets everywhere are feeling the negative effects of these measures. Chad Bown and Yilin Wang dig into China’s recent moves for the Peterson Institute for International Economics. Bloomberg analyzes the supply chain challenges prompted by lockdowns in China.

Meanwhile, Indonesia is roiling markets with its snap decision to ban palm oil exports, as reported by Nikkei Asia. Increasing domestic scrutiny and China’s zero Covid policies inhibited Chinese direct investment in Europe in 2021. What does this portend for 2022?  MERICS and the Rhodium Group present a new analysis.

Mentioned Publications

  1. China's recent trade moves create outsize problems for everyone else - Chad P. Bown and Yilin Wang, Peterson Institute for International Economics, 25 April 2022
    China’s role in global trade involves using trade tools to protect domestic producers and suppliers, which affects global markets, including for key foodstuffs.
  2. Indonesia's policy flip-flop on palm oil export ban: 5 things to know – Erwida Maulia, Nikkei Asia, 27 April 2022
    What does Indonesia’s sudden ban on palm oil exports – a key commodity - portend for the global economy?
  3. Global Supply Chain Crisis Flares Up Again Where It All Began – Brendan Murray, Ann Koh, and Kevin Varley, Bloomberg, 26 April 2022
    With supply chains already under strain, the war in Ukraine and China’s lockdowns translate to even bigger supply chain challenges in 2022 than in 2021.
  4. Chinese FDI in Europe: 2021 Update - Agatha Kratz, Max Zenglein, Gregor Sebastian, and Mark Witzke, Rhodium Group and MERICS, 27 April 2022
    Foreign investment saw a rebound in 2021. But Chinese direct investment in Europe stalled due to increasing restrictions on outbound investment and China’s ongoing zero Covid policies.

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Are US officials reconsidering tariffs?

Recent statements by the Biden administration and Congressional Republicans may signal a reconsideration of tariffs on China, as inflation bites. Bloomberg reports on comments by Treasury Secretary Yellen. Are there shifts within the Republican Party on the tariffs imposed by former President Donald Trump? Politico covers the story.

Meanwhile, the Wall Street Journal reports on the “de minimis rule” which is being used as a loophole by companies to avoid billions in tariffs, and on the possible closure of this loophole.

Mentioned Publications

  1. Yellen Signals Openness to Paring Tariffs on Imports From China – Christopher Condon, Bloomberg, 23 April 2022
    Will pressure to ease inflation by cutting former President Trump’s use of tariffs work as leverage in negotiations with China?
  2. With Trump gone, Republicans look to weaken his China tariffs – Gavin Bade, Politico, 22 April 2022
    With former President Trump out of office, US Congressional Republicans appear to be shifting their views on China tariffs.
  3. The $67 Billion Tariff Dodge That’s Undermining U.S. Trade Policy - Josh Zumbrun, The Wall Street Journal, 25 April 2022
    The “de minimis rule” is allowing companies to avoid billions in tariffs, and undermining US trade policy in the process.

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Carrots, sticks, and free trade agreements

As the Biden administration moves forward with its Indo-Pacific economic strategy, and key allies like South Korea move forward with CPTPP accession, is US economic engagement in Asia too little, too late? The US may be focusing too much on military aid and not enough on trade and economic engagement, suggests the Financial Times. Korea faces challenges in its negotiations to join the CPTPP. The Korea Times explains the next steps.

Mentioned Publications

  1. America’s lopsided China strategy: military aid but not enough trade - Demetri Sevastopulo, Financial Times, 26 April 2022
    US allies in the Indo-Pacific are encouraged by renewed military engagement but frustrated by lack of outreach in the trade and economic sphere.
  2. Korea joining CPTPP tall task for Yoon administration – Lee Kyung-min, The Korea Times, 18 April 2022
    As Korea prepares to apply for CPTPP membership, what challenges will the incoming Yoon administration face in negotiating accession to the agreement?

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