Revisit: Trade in the First Hour of My Day

Revisit: Trade in the First Hour of My Day

All the ways that trade affects the first hour of my day demonstrates one contributing factor to globalisation. But these benefits to me from trade—my ability to use an iPhone alarm, to shower and shave, and to drink good coffee—are trade most simply, not globalisation itself. A decision like Brexit, a desire to decouple from trade or to “build a wall” will not eliminate trade or the ability to enjoy these products; it will merely make them more expensive. It would not eliminate foreign ideas and cultures from permeating society, for those have little to do with trade itself. At its most simple level—taking just the first hour of one’s day—trade is, in short, the ability to enjoy life as we know it. It is the ability to wake up to an alarm while lying on cotton sheets, to walk on tiles and to shower and to catch the bus to work. We misunderstand and underestimate trade at great costs to ourselves and to society.

Designing Next Generation Trade Agreements for the Digital Economy

Designing Next Generation Trade Agreements for the Digital Economy

From a business perspective, getting an agreement on digital rules among the widest number of countries is best.  Such a decision will create conditions for improved stability, lowered risk and reduced compliance costs in engaging in trade and business everywhere, with similar or identical rules and regulations in place.  But there is a trade-off between getting an agreement with many parties and getting an agreement in a timeframe that businesses would view as helpful.  While governments can operate in cycles of years, companies are concerned about results every quarter.  This mismatch between expectations and timing is particularly acute in the digital world, where business developments are often made at light speed.  Governments are sometimes struggling to even understand the ideas and principles of digital trade and are faced with particular challenges in crafting sensible regulations. Digital trade was largely unregulated, or lightly addressed, in most places up until a few short years ago.  With few exceptions, firms were free to do whatever they wanted in the digital space, as long as they did not violate existing non-digital rules.  Governments tried to adapt physical rules, in some instances, to the digital realm.  This situation has grown increasingly untenable.  The exponential growth rates of the digital economy means that governments cannot go on trying to shoehorn analogue rules to digital products and services.   So how should governments manage the increasingly important digital world?  There are at least four broad responses so far.

Unpacking the Digital Economy Partnership Agreement (DEPA)

Unpacking the Digital Economy Partnership Agreement (DEPA)

The DEPA sits in the middle.  It sets out a series of modules covering a range of topics of relevance to firms that trade digital services, ship goods across borders via e-commerce, or are otherwise involved in the digital and technology space.  These modules are meant to be building blocks.  Countries could opt to dock directly onto the DEPA, expanding the agreement with new members.  Or governments could decide to pick up and use modules, in whole or in part, in various settings.  These include slotting them directly into other trade agreements or opting to align domestic policies to DEPA. The significance of DEPA does not sit with the current three members, who have largely already agreed to uphold the same commitments and principles in the agreement under their Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) membership.  Instead, DEPA matters if and when more governments agree to use the modules or align domestic policy with its framework and structure.  The spread of DEPA is key—if non-members who are considering problematic rules on the digital economy could be encouraged to join, the agreement will be seen as a critical turning point for policy on digital issues.

Phase 1 US-China: Implications for Asia

Phase 1 US-China: Implications for Asia

What does this mean for Asia?  At least three things seem obvious. First, the tariff pressures are going to remain for companies.  Not only are firms still subject to extensive tariffs, but the risk of future increases is only marginally reduced.  In the very best case scenario, firms will continue to pay 25% tariffs for another 10 months. Companies may not be able to weather this extent of damage for so much longer.  Many companies will finally pull the trigger on relocation plans.  Most of the supply chain adjustment will not be redirected back to the United States, but will be shuffled around globally.  Many Asian markets are obvious places for moving manufacturing.  Second, the restrictions on Chinese investment into the US will remain in place.  Chinese investment dollars are likely to be redirected, including into other Asian markets.  The impending start of the Regional Comprehensive Economic Partnership (RCEP) will accelerate this trend. 

Regulatory Divergence: A Business Nightmare

Regulatory Divergence: A Business Nightmare

Brexit and trade discussions between the UK and the EU are likely to involve significant amounts of time and energy spent on the issue of regulations—how far can/is the UK able to diverge from existing EU regulations?  While this may seem a topic of interest to only trade nerds and lawyers, it matters a lot to businesses of all sizes.  The question of regulatory convergence or divergence is a problem everywhere. The UK and EU are currently unwinding decades of increasingly close regulatory patterns that encompass all manner of topics—from agriculture to services to health.  Most other countries and regions are less tightly intertwined, but the basic issues remain similar. Regulations are typically put in place to ensure the health and safety of domestic consumers or to protect plant and animal life and health.  There are often other reasons for imposing trade-related regulations, but these are the primary objectives. To understand why regulations matter to firms in trade, it is easiest to start with a simple example—a company that makes tables and then sells them into Europe.