New trade patterns unfold as ‘rule-maker’ China rises

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The Anthony & Susan Hardy Gallery at the Hong Kong Maritime Museum features artifacts from the Canton Trade period when China restricted commerce with foreign merchants to the Guangzhou port.

By Marifi S. Jara
Mindanao Bureau Chief

HONG KONG’S Maritime Museum gives a glimpse of China’s trading prowess in the centuries when seafaring was the order of the day, and how its rules back then controlled foreign merchants.

One of the eye-catching pieces in the collection is the Alexander Hume scroll painting, a panoramic illustration of foreign factories — Danish, French, Swedish, English and Dutch — lined up along the Pearl River with their respective flags hoisted.

A wall panel in the same section of the museum explaining China’s “Tribute or embassy” policy narrates how the English attempted more than once to “place trade and political relation with China on a western footing… without success…”

But the Opium Wars in the mid-1800s “eventually led to a system of interstate relations and international commerce,” the chronicle concludes.

A similar narrative loudly resonates today following China’s formal reentry in the global market with its accession to the World Trade Organization (WTO) in 2001 and the ongoing US-China trade war.

“Up until 2005, China was very quiet in the WTO negotiations… Later, China participated more actively… China has emerged from being a rule-taker to a rule-maker,” Henry Gao, associate professor of law at the Singapore Management University, said during the National Press Foundation’s International Trade Training held in Hong Kong on June 17-20.

Mr. Gao said the Chinese government has been engaging in proposals on e-commerce, investment facilitation and trade remedies, among others.

The rise of China as an economic power and its feud with longstanding giant US have sent jitters across the globe given today’s interlinked supply and value chains.

Global merchandise trade in 2018 was valued at $19.48 trillion while commercial service trade was $5.80 trillion, according to a WTO report released April 2.

Investors are anxious, not just about the US-China dispute per se, but also due to uncertainty over the trade war’s outcome.

“Of course people are worried, it is really starting to hit business and affect business in many ways, but in different ways depending on what sector you’re working in,” said Tara Joseph, president of the American Chamber in Hong Kong.

Businesses are “trying to figure out” what to do at this point, she said, “but there’s an issue there because they don’t know where the trade war is going, it’s very hard for them to make strategic decisions.”

Stephen Olson, research fellow at the Hinrich Foundation, a non-profit organization that promotes sustainable global trade, said there is a silver lining to the shaky global economic outlook.

“Trade negotiations always have near-death experiences,” Mr. Olson said, “New patterns of trade emerge during impasse.”

One of the patterns that has been emerging is the bigger role for Southeast Asian countries in the global economy.

“We’ve started to see more people doing business in Southeast Asia… the movement of the supply chain away from China because of the US-China trade friction and also, to be frank, because of the rising cost of running factories in China has also had an impact on Southeast Asia… Cambodia, Vietnam, Philippines, Indonesia — all those places have become more important,” said Ms. Joseph.

“It would be really interesting to see if in the long term, southeast Asia or ASEAN (Association of Southeast Asian Nations) can really get its act together and become a formidable force in trade discussions,” she added.

China’s Belt and Road Initiative, a grand proposal to expand land and sea connectivity that would involve more than 100 nations, also has far-reaching “geopolitical shifts, implications” on global trade and investments, said Julien Chaisse, a law professor at the City University of Hong Kong.

In the reshaping of global trade patterns, bilateral and multilateral free trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) as well as bilateral investment treaties become more critical in ensuring fair trade. The RCEP involves the 10 ASEAN member-nations, Australia, China, India, Japan, New Zealand and South Korea.

Michaela Browning, Australian consul general for Hong Kong and Macau and previously a trade negotiator in the WTO, emphasized the importance of continuously pushing for “open and rules-based and enforceable trading systems” through agreements.

She said, “(It) is particularly important to medium and small economies, to vulnerable and developing economies.”

In the meantime, as the American and Chinese trade panels prepare for the anticipated Trump-Xi meeting at the G20 Summit in Osaka this week, the global trade and investment community watches and waits with bated breath.

Singapore-based Steven Okun of strategic advisory firm McLarty Associates said, “There is a deal to be had, but whether we can get there, we’ll have to see.”