Summary of the General Discussion on “Defending the Rule-based Trading Regime: The Multilateral Trading System at Risk and Required Responses”

Lu Ming started the discussion by asking whether Fukunari Kimura, the author, viewed the current U.S.–China conflict as similar to or different from the U.S. conflict with Japan in the 1980s. Kimura responded that they are different because of two factors: (1) China's exceptional growth compared with Japan; and (2) the fact that Japan had to consider the implications of its economic policies for its national security policies since Japan was tied to the U.S. umbrella, whereas China is free to decide its trade policies from a pure economic perspective.Prema-chandra Athukorala cautioned that Kimura's support of free trade agreements (FTAs) should be preceded by investigations of whether they are worth the effort. More broadly, Athukorala argued that only 30 percent of world trade is in FTAs even though 70 percent of countries have FTAs. In response, Kimura argued that the small share of trade routed through FTAs is not a problem, because the combination of MFN and zero percent tariffs on many goods eliminates the need for FTAs in many cases. As a result, Kimura argued that the primary risk of the current trade conflict is the risk of changes to zero percent tariff trade, which currently constitutes roughly 60 percent of global trade.Athukorala also advocated for the pursuit of WTO-based intellectual property agreements among like-minded countries, similar to the plurilateral information technology agreements that have been concluded. On this point, Kimura agreed that all information technology agreements that can be concluded on an MFN basis should be pursued.Maria Socorro Gochoco-Bautista questioned Japan's ability to take on a leadership role in the conclusion of mega-regional agreements. In particular, given Japan's history of acquiescing to U.S. pressure on trade matters, and as a U.S. ally that may be inclined to take the side of the United States, Gochoco-Bautista questioned whether developing countries could trust Japan to take their side. Similarly, Jin Kyo Suh argued that WTO decisions are predominantly shaped by only a handful of countries, including the United States, EU, China, and sometimes India. In this context, Suh said it would be impossible to do anything without action from these countries, and as a consequence, Suh asked, how could those countries do anything. In response, Kimura noted that Japan, as major, but not super, power, must maintain its support of rule-based trade. Kimura acknowledged that developing countries often view trade negotiations as being shaped by the interests of rich countries. However, he argued that the involvement of developing countries is essential to further progress. At the same time, Kimura argued that the absence of the United States from institutions such as the WTO would also lead to poor outcomes for developing countries. Currently, the U.S. “poison clause” in the USMCA, which precludes Canada or Mexico from negotiating trade agreements with non-market economies without first receiving U.S. agreement, prevents Canada or Mexico from pursuing trade agreements with China.Vu Quoc Huy asked why state-owned enterprises (SOEs) are an issue now, noting that the issue could either be raised by concerns about the activities of SOEs within China, or by the FDI activities of SOEs overseas. Here, Kimura argued that the primary issue of contention is China's provision of subsidies to its SOEs.

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