Wednesday 20 Sep 2017 | 13:52 | SYDNEY
What's happening on

Photo: Flickr/Pieter van Marion

Overview

The vitality of the global trading system is crucial not only to Australia’s long-term economic outlook, but also the countries within our region. Access to global trade networks both for Australia and key emerging markets within the Indo-Pacific region are therefore of major interest to the International Economy Program at the Lowy Institute for International Policy.

Australia’s terms of trade have changed significantly in recent years. After reaching historic highs due to record export prices in Australia’s three major bulk commodities (iron ore , metallurgical coal and thermal coal), Australia’s terms of trade are projected to return to pre-boom levels over the next decade.  This readjustment will have a significant impact on the value of the Australian dollar, and will have a number of other effects on the real economy. 

Similarly, post the global financial crisis, the structure of international trade is undergoing a major transition. Despite the relative gains made from a multilateral trading system that centred around the World Trade Organization (WTO), the inability to conclude the Doha Development Agenda has seen a decline in enthusiasm for major multilateral rounds. In particular, the single undertaking agreement in the WTO (i.e. nothing is agreed until everything is agreed) has led many countries to pursue bilateral and mega-regional agreements (such as the Australia-Japan FTA, and the Transpacific Partnership or TPP).

The emergence of mega-regional agreements like the TPP will have significant ramifications for the future of the global trading system. Like the Transatlantic Trade Investment Partnership (TTIP), the TPP will see a collection of major economies authoring new standards and rules for trade. This could detract from the multilateral underpinnings of the WTO and the truly global trading network that had begun to emerge since the WTO was established in 1995. That neither TPP nor TTIP includes the poorest countries in the world, let alone China, raises further questions about the legitimacy, efficiency, and economic value of a shift away from true multilateralism.

What the Lowy Institute does

The Lowy Institute has approached current and future trends in the global trading system from several angles. In addition to the work on trade undertaken by the International Economy Program, the G20 Studies Centre has produced several outlooks and perspectives on the role of trade within global economic governance generally, and within the Group of Twenty process specifically. This has involved investigations into initiatives of the G20 on trade, such as the post-GFC ‘standstill’ agreement that prevented a return to 1930s-era trade protectionism that followed the Great Depression as well as how the G20 can value-add to establishing a more coherent global trading system, that ensures new initiatives such as the TPP and the TTIP make positive contributions to the future of international trade, rather than become vehicles for its disintegration.  This has become especially relevant after the conclusion of the Bali talks on trade facilitation, that represented the first agreement within the WTO, since its creation.

International trade, and governance of the global trading system, will continue to be an ongoing focus for the International Economy Program, as well as the G20 Studies Centre.

Free trade is being deferred but not reversed

This is the first in a three-part series on the future of world trade from a global (part 1), Asia Pacific (part 2) and Australian (part 3) perspective. Is protectionism on the rise? As we moved into 2017 the conventional wisdom was 'yes'. The G20 warned about it in 2016. The annual January

TPP: With one down, can 11 stand?

Reports of the death of the Trans Pacific Partnership (TPP) were exaggerated – or at least premature. Move over a TPP of 12 nations (TPP12) and make way for TPP11, the lower number reflecting the withdrawal of the US from the agreement. When President Trump withdrew the US from the TPP in

Lessons from India on migration’s role in trade policy

Prime Minister Turnbull yesterday carefully signalled a potential India-Australia Free Trade Agreement is not a priority for his government. This comes after the Abbott Government set a very public benchmark for concluding an India-Australia FTA by the end of 2015, an overly optimistic commitment

Why the TPP should be saved

Perhaps there is, as Ross Garnaut has argued, no silver lining to Donald Trump’s economics. But there may be a small silver lining to Trump’s rejection of the Trans Pacific Partnership (TPP) and his embrace of protectionist policies during the campaign. It depends if the response to these helps

Douglass North and the Trans-Pacific Partnership

Now that the terms of the Trans-Pacific Partnership (TPP) have been agreed, the participant countries have to decide whether to ratify the deal. In assessing the benefits, where might we turn for guidance on the economics? First thoughts might go to David Ricardo, father of one of the few ideas

TPP: Australia should bring in China and Indonesia

The negotiators have finally reached agreement on the Trans-Pacific Partnership (TPP). The US Congress might yet be a stumbling block, but the many US interest groups which stand to benefit will influence that outcome. Other TPP countries have to get legislative approval too. Whatever the

TPP: Not worth the risk

After marathon talks, the Trans Pacific Partnership has been sealed. The stage is now set for some fantastic battles to get this through national legislatures. I'll leave it to others to count the numbers. I've written previously about my concerns regarding the TPP, and agreements like it. I won't

Peak box? Global container trade is slackening

In a little-noticed interview, the chief of Panama's Canal Authority concedes that 'the world and the canal were unlikely to ever again see the booming container trade that characterised the 1990s and early 2000s' due to shifting manufacturing patterns and American thrift. Obviously, he has

The secretive TPP: Never again

One aspect of the Trans-Pacific Partnership (TPP) that has come under criticism is the lack of transparency in the negotiating process. Could a more transparent model be used for these kinds of negotiations? In other areas of official decision-making, recent decades have seen a big shift towards

Why Australia needs Austrade

Bruno Mascitelli is editor of the newly released The Austrade Story: Export and Investment Facilitation Under the Microscope. The Australian Trade Commission, or Austrade as it is commonly known, turns 30 in 2016. It came into existence in 1986 as a statutory government agency for export promotion

The TPP and intellectual property rights

Earlier posts have discussed how the Trans-Pacific Partnership (TPP) – if it comes into force – will be part of the process of setting global rules across a wide range of issues, including intellectual property rights. The just-released Harper Competition Policy Review notes the importance

Australia needs a modern and globalised tax system

The Abbott Government will shortly release a discussion paper on the Australian tax system. It will be the first step towards the much anticipated tax white paper. International factors should figure prominently in the white paper — specifically, how to ensure that Australia has a resilient tax

The 'beggar-thy-neighbour' currency wars

Leon Berkelmans is in good company in defending the policy actions which have come to be described as 'currency wars'.  Ben Bernanke gave the same defence of the US Fed's actions while he was Chairman: while low interest rates and 'quantitative easing' (QE) may give the domestic economy an extra

How much is too much? The debt mystery

The 2008 financial crisis left no doubt that ill-considered debt can cause major damage not just to an individual country, but to the global economy. You might think that by now, six years later, balance sheet repair would have taken debt below pre-crisis levels. However, debt burdens are

Is globalisation slowing?

In the decades leading up to the 2008 financial crisis, international trade typically grew much faster than GDP. This reflected increasing global economic integration: tariff barriers were coming down, trade groups (eg. the eurozone, NAFTA, ASEAN) facilitated trade through regulatory simplification

A Chinese canal in Nicaragua?

There is pride in Hong Kong that a local private company is pushing ahead with perhaps the world's largest-ever civil works project, the 280km long, 500m wide Nicaragua Canal. Construction began in December 2014. The South China Morning Post dismisses outside suspicions while modestly describing

Why Peter Thiel is wrong about monopolies

A few weeks ago Sam Roggeveen quoted PayPal founder Peter Thiel, who argued that competition is over-rated and monopoly would enhance innovation. We shouldn't be surprised that business people are in favour of monopoly. In 1776 Adam Smith observed: People of the same trade seldom meet together,

Congress, midterms and the TPP

US mid-terms elections will take place on 4 November, with polls suggesting the Republicans will re-take control of the Senate. President Obama's next steps on the Trans Pacific Partnership (TPP), which his Administration says is the key economic plank of the rebalance to Asia, will be heavily

The WTO is in big trouble

The Director-General of the World Trade Organisation (WTO), Roberto Azevedo, says the institution has descended into 'paralysis'.  Director-General of the World Trade Organisation, Roberto Azevedo, Bali, 2013. Following the failure to get India to remove its objection to advancing the deal on

China wants a bigger piece of the smartphone business

The smartphone in your pocket embodies today's cutting-edge technology. It is also a product of a global supply chain decidedly old-school in the way it shares rewards. Two brands, Apple and Samsung, scoop over 100% of the profit pool (the other brands are losing money, giving them negative

Australian Customs: A bigger role to play in trade

In a new Lowy Institute Analysis launched today, Nicholas Humphries, the Australian Customs and Border Protection Service Fellow at the Lowy Institute, examines how Customs can increase Australia's trade competitiveness at a time when goods and services are increasingly produced across borders in

Interview: Adam Minter on the Junkyard Planet

Journalist Adam Minter has written a fascinating account of the global rubbish and recycling industry. I recommended his book, Junkyard Planet, as one of my top 'development books' of 2013. Here is part 1 of an interview I am conducting with Adam via email, and below the text a couple of captioned

Distinguished Speaker series: The future of trade policy in an uncertain world - Dr Craig Emerson presentation

On Friday 10 December, the Lowy Institute brought together the Hon Dr Craig Emerson MP, Minister for Trade, and an expert panel including Alex Thursby, the Chief Executive Officer, Asia Pacific, Europe & America, ANZ Banking Group and Anwarul Hoda, the Chair Professor of ICRIER’s Trade Policy and

Wednesday Lunch at Lowy: The Commercial Policy and Trade Strategies of the World’s Leading Economic Powers - Professor Simon Evenett

On Tuesday, 29 June 2010, the Wednesday Lowy Lunch Club provided an opportunity to hear from one of the world’s leading experts on the international trading system, Professor Simon Evenett. Professor Evenett discussed the commercial policy and trade strategies of the United States, Europe, and

Keynote address: Doing business with the United States in a post GFC world - The Honourable Anthony Byrne MP

Despite the economic downturn following the global financial crisis, the United States remains Australia’s most significant commercial partner, taking into account the value and diversity of our two-way investment and trade flows. On Tuesday 18 May at a panel discussion on the prospects and trends

Wednesday Lunch at Lowy: 2010 The year ahead - Research staff presentations

On 3 February, at the first Wednesday Lunch at Lowy for 2010, three Lowy Institute scholars discussed where the world and our region are headed after a tumultuous year in 2009. Will things be calmer or more uncertain?Mark Thirlwell, Program Director International Economy, assessed the post-GFC

Wednesday Lunch at Lowy: How will global trade fare post GFC? - Professor Robert Lawrence presentation

At the Wednesday Lunch at Lowy on 10 June, Professor Robert Lawrence of Harvard University spoke on the global financial crisis and international trade.At precisely the time when coordinated global action is required to meet the GFC, there are worrying signs in the US and other leading economies of

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