RCEP is now vital in defending the global trading order

US President Donald Trump boards Air Force One at Joint Base Andrews in Maryland, US, 2 August 2019 (Photo: Reuters/Yuri Gripas).

Authors: Peter Drysdale, ANU, and Mari Pangestu, University of Indonesia

The principal founder of the WTO-based global trading order, the United States, appears hell bent on tearing it down by flouting its rules and undermining its core institution — the appellate board at the heart of its dispute settlement process. What can the rest of the world do to defend its stake in the prosperity and political security that the multilateral trading order delivers?

The United States has gone from underwriting the order for the past 70 years to becoming its biggest threat.

Everybody recognises the need to update the WTO rules and the global trading system. That was acknowledged in the G20 summit declarations in Argentina last year and Osaka in June. But these declarations are weasel words in the face of the existential threat that US trade strategies pose to the rules-based trade regime today.

Realistic calculations of the cost to the United States itself, its principal protagonist — China — and the rest of the world suggest a loss of over 5 per cent of global GDP, and that US trade strategies are already shaking global investor confidence. Cross-border international investment plummeted close to 30 per cent in 2017 and 20 per cent last year. But there is no end in sight to this economic turmoil as Trump flouts the temporary trade truce with another tariff hike.

The fundamental issues behind the US–China trade tensions are not going to be solved any time soon and their bilateral, or even unilateral, resolution would also damage the rest of the world. How does the rest of the world confront a United States gone rogue against its own and global interests?

The rest of the world is not used to the burden of leadership responsibilities that it long presumed the …continue reading