IIT - March Newsletter

Institute for International Trade

A message from the Director

Two weeks ago Chinese authorities in Beijing raided the offices of a prominent US due diligence law firm, Mintz Group, and closed it down. This occurred during a series of high-level economic conferences in China, featuring many prominent western CEOs eager for their first interactions with the new Chinese economic leadership team. The message that China is still open for business stood in stark contrast to the inescapable signal that western-style due diligence may no longer be tolerated in China’s new era, and must have been a key corridor discussion talking point from the “Summer Davos” through the Bao Leadership Forum. Yet the rising prominence of due diligence amongst western countries and multinationals makes for increasingly complex dynamics, not least for the companies increasingly required to police sometimes mind-bogglingly complex supply chains. These issues are the focus of a research project we’ve initiated with Friedrich Schiller University in Jena, Germany, and Edith Cowan University, under the Universities Australia-German Scientific Exchange cooperation programme. Our first feature piece below is an attempt to make sense of the issues; watch this space as there is more to come.

This values-based conflict is, of course, embedded in growing geopolitical contestation. In our second feature piece Carlos Primo Braga and Douglas Lippoldt reflect on the growing risks to the multilateral trading system, and propose that the antagonists take a deep breath to reflect on why the system was created in the first place. It makes for sobering reading. These issues also featured prominently in the talk that Visiting Fellow Ken Ash?— former Director for Trade and Agriculture at the OECD — gave at the University recently.

Clearly China looms large in the recalibration of the global trading system and Australia’s trade relationships. I reflected on these matters during a recent talk I gave to members of the South Australian Chamber of Mines and Energy. But China is also recalibrating its trade strategies and promoting diversification, particularly in relation to sourcing minerals for its vast industrial supply chains and feeding its population. Visiting Senior Lecturer Dr Lauren Johnston reflects on these issues in the context of China-Africa relations, in our final featured piece.

Professor Peter Draper

POLICY & ENGAGEMENT

The Political Economy of Due Diligence Legislation

Western democracy increasingly values?human and social rights, civil liberties,?and sustainability issues. This is?materialising?into legalisation, obliging domestic businesses to both comply and enforce?these values?along supply chains. However, this legalisation has its controversies regarding compliance costs, impacts on foreign relationships,?and effectiveness, inter alia. Due diligence legislation is inherently complex.?This policy brief develops a conceptual overview of the political economy challenges when designing these laws and evaluates how Western countries could enforce values-based trade along international supply chains.

Prof Peter Draper, The Institute for International Trade, The University?of Adelaide;?Prof Andreas Freytag, Friedrich Schiller University, Jena; Dr Naoise McDonagh, Edith Cowan University;?Prof Matthias Menter, Friedrich Schiller University, Jena.

Geopolitical tensions and economic fragmentation: a trade policy response

Against the background of a hot war in Eastern Europe and an evolving cold war, and in the context of nations’ mutual economic interests, a question arises as to the status of the multilateral trading system. The authors argue that trading nations need to renew the value proposition that underpins the multilateral system for trade and investment. An economically compelling, succinct, and clear restatement of the core principles endorsed by leading economies may help to elicit popular buy in for the revitalisation of multilateralism and against fragmentation.

Carlos A. Primo Braga is an?Adjunct Professor, Funda??o Dom?Cabral, Brazil; Visiting Professor at?IMD, Switzerland and at El Colegio?de México.?

Douglas Lippoldt is a non-resident?Senior Fellow at the Centre for?International Governance Innovation?(CIGI, Canada).

What to expect from June’s China-Africa Economic and Trade Exhibition

Diplomatic efforts towards China by the Albanese Government since taking office in May 2022 appear to be paying off in the trade context. Australia’s Foreign Minister Penny Wong has been clear, however, that there’s no China “reset”, arguing that this is impossible. That is because ties are not projected to return to where they were before bilateral tensions induced a deep freeze,?rather to a new bilateral equilibrium. China’s own advancing global trade agenda, in which trading partner diversification features prominently, speaks to that too. This will be on display at the upcoming third biennial?China-Africa Economic and Trade Exhibition, hosted by Changsha, Hunan province, in June.

Dr. Lauren Johnston is a Visiting Senior Lecturer, Institute for International Trade, Adelaide University and Associate Professor, China Studies Centre, University of Sydney; and a consultant senior researcher on China/Africa for the South African Institute of International Affairs

EVENTS

Australia’s options in a turbulent international trade cooperation landscape with Ken Ash

IIT recently hosted an informative discussion on?“What are Australia’s options in a turbulent international trade cooperation landscape?” at the University of Adelaide. Ken Ash, formerly the OECD’s Director for Trade and Agriculture, and IIT Visiting Fellow,?as keynote speaker, spoke to?Australia's position as a middle power dependent on international trade, and the tectonic forces shaping the global trading system.

The discussion also featured speakers Dr Jessica Gallagher,?Deputy Vice-Chancellor for Global Engagement, Professor Peter Draper,?Executive Director of IIT and?Professor Fiona Yap, Head of the School of Economics and Public Policy at the University of Adelaide.

As an interactive public event, other key trade colleagues joined the discussion, including Emeritus Professor Kym Anderson and David Reynolds, CE of South Australia's Department of Trade and Investment.?

SACOME Thought Leadership | Trade Relations with China

Peter Draper recently spoke at a SACOME members-only?thought leadership event on?"Trade relations with China", alongside Elizabeth McGregor?(Assistant Secretary, East Asia Outreach Branch, Dept. Foreign Affairs & Trade).

Virtual Trade Policy Course with DFAT

IIT?are launching another iteration of the 5-week Virtual Trade Policy Course for the Department of?Foreign Affairs and Trade (DFAT). IIT Senior Lecturer Simon Lacey travelled to Canberra this month to?interview course candidates, and?to also develop future training that IIT will be providing in partnership with DFAT's Diplomatic Academy for Australia's trade?diplomats.?

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