Caribbean Trade Law and Development

Tag: China

  • BRICS Summit 2023: Expanded Development Options for the Global South

    BRICS Summit 2023: Expanded Development Options for the Global South

    By Tracia Leacock, PhD – Guest contributor

    The 15th BRICS Summit was convened from Tuesday, August 22 to Thursday, August 24, 2023, in Johannesburg, South Africa. The BRICS acronym represents the fact that the current grouping comprises the five nations of Brazil, Russia, India, China, and South Africa, among the world’s largest and fastest growing emerging markets and developing countries, across continents. BRICS aims to serve as a platform for the voices and interests of the Global South.

    As of 2022, the current five BRICS nations accounted for approximately 25 percent of global GDP (but 31.5 percent in terms of purchasing power parity (PPP), already surpassing the G7’s 30 percent), nearly 20 percent of global trade, 42 percent of the entire global population, and 26 percent of the world’s landmass. Intra-BRICS trade in 2022 topped $762 billion.

    All five BRICS nations were represented at the leaders’ discussions by their heads of state (Russia’s President, Vladimir Putin, attended via videoconference, with Foreign Minister Sergey Lavrov leading the in-person delegation).

    This year’s gathering garnered the most media attention of any BRICS summit and was the most heavily attended. South Africa’s President, Cyril Ramaphosa, invited the leaders of all 54 African states, as well as of 15 other Global South nations, in addition to representatives of major international organisations and regional groupings, including the United Nations and the G77+China (which presently includes 134 developing nations, and was represented by Cuba’s President, Miguel Díaz-Canel Bermúdez). 

    During this highly anticipated BRICS summit, member states deliberated on various global affairs issues. Some salient points are as follows[1]:

    Clarification about what BRICS represents

    BRICS leaders emphasised that, contrary to rumours in some pre-summit news coverage, the group is not aiming to challenge the West.

    Brazil’s President Lula da Silva said, “We do not want to be a counterpoint to the G7, G20 or the United States.” “We just want to organise ourselves.” India’s Prime Minister Narendra Modi called on BRICS to be “the voice of the Global South.” Chinese President Xi Jinping also rejected “bloc confrontation,” insisting that “hegemonism is not in China’s DNA,” and called on BRICS to build a more just and equitable international order.

    Reform of global financial institutions

    “…We require a fundamental reform of the global financial institutions so that they can be more agile and responsive to the challenges facing developing economies…,” Ramaphosa told the summit’s Business Forum on Tuesday, August 22.[2] He lauded the achievements made by the New Development Bank (NDB). Known as the BRICS bank, NDB was established by the group in 2015 as an alternative to traditional Multilateral Development Banks (MDBs) such as the IMF and the World Bank.

    In an August 22 interview with Financial Times (FT), Dilma Rousseff, former President of Brazil, and now President of the Shanghai-based NDB, stated that the bank, which already makes loans in China’s renminbi (yuan) currency, would also lend in the national currencies of other BRICS states: Brazilian real, Indian rupee, and South African rand.[3]

    Per FT:

    Rousseff said lending in local currency would allow borrowers in member countries to avoid exchange rate risk and variations in US interest rates. “Local currencies are not alternatives to the dollar,” she said. “They’re alternatives to a system. So far the system has been unipolar…it’s going to be substituted by a more multipolar system.”

    The Brics bank has also tried to distinguish itself from the World Bank and IMF by not setting lists of political conditions on loans. “We repudiate any kind of conditionality,” Rousseff said. “Often a loan is given upon the condition that certain policies are carried out. We don’t do that. We respect the policies of each country.”[4]

    NDB aims to issue 30 percent of its loans in local currencies by 2026, and 40 percent of funding is allocated to climate change mitigation and adaptation, including energy transition.

    Global governance reform

    In his plenary address, Ramaphosa said: “The world is changing. New economic, political, social and technological realities call for greater cooperation between nations. These realities call for a fundamental reform of the institutions of global governance so that they may be more representative and better able to respond to the challenges that confront humanity.”

    Point 7 of the summit’s final communiqué also calls for “a comprehensive reform of the UN, including its Security Council, with a view to making it more democratic, representative, effective and efficient, and to increase the representation of developing countries.…”

    Point 8 supports “the open, transparent, fair, predictable, inclusive, equitable, non-discriminatory and rules-based multilateral trading system with the World Trade Organisation (WTO) at its core, with special and differential treatment (S&DT) for developing countries, including Least Developed Countries.”

    Sustainable development goals (SDGs) and climate mitigation

    UNCTAD Secretary General, Rebeca Grynspan, in an interview with Xinhua news service ahead of the BRICS summit, called for a more inclusive multilateral system, naming China’s Belt and Road Initiative (BRI) as an example for cooperation on sustainable development.

    “We need the voice of the South in revitalizing the sustainable development goals as the only real commitment for solidarity and collective action at the global level,” said Grynspan. “All the BRICS countries are also in the G20. We want to make multilateralism more vibrant, more inclusive, and to help build a more multilateral world even in a moment of more multipolarity.” “It’s important to have another platform that represents the perspective of the developing world and the need for development and more opportunities.”[5]

    South African President Ramaphosa said that “…BRICS nations need to advance the interests of the global south and call for industrialised countries to honour their commitments to support climate actions by developing economic progress….”

    Options for global trade currencies and payment settlement systems

    At a BRICS summit plenary session Putin said, “…we see a need in increasing the role of our states in the international monetary and financial system, the development of interbank cooperation, the expansion of the use of national currencies and the deepening of cooperation between tax, customs, and antimonopoly authorities.”

    Pointing out that “Global economic recovery relies on predictable global payment systems and the smooth operation of banking, supply chains, trade, tourism and financial flows,” Ramaphosa also added that BRICS “will continue discussions on practical measures to facilitate trade and investment flows through the increased use of local currencies.”

    At present, BRICS members China and Brazil conduct their $170 billion of trade in their national currencies. China and Russia also settle 80 percent of their $190 billion trade in renminbi (yuan) and ruble using China’s CIPS and Russia’s SPFS payments settlement systems. Other nations settling part of their trade in yuan include Bolivia and Argentina, which recently also used yuan for an IMF loan payment. India offers rupee accounts with a growing number of trade partners, including Guyana.

    Additionally, each of the current five BRICS nations is piloting or trialling its own Central Bank Digital Currency (CBDC), a concept invented and pioneered on the Caribbean island of Barbados.

    Anil Sooklal, South Africa’s BRICS Sherpa said, “What we are talking about is creating more financial inclusion in terms of global financial transactions, global financial trade and how we conduct our payment.”

    The group indicated that complex discussions about a common trade currency are ongoing and would be explored at next year’s summit. Currency deliberations were led by Standard Bank Group CEO Sim Tshabalala, who indicated that the BRICS Business Forum gave noteworthy consideration to Afreximbank’s Pan-African Payment and Settlement System (PAPSS) for cross-border payments within Africa.[6]

    Reuters also reported that “South Africa’s finance minister said on Thursday that the BRICS grouping would not be looking to replace international payment systems including SWIFT, but rather consider creating one that would strengthen trade in local currencies.”[7]

    Such a BRICS platform would hold potential for “networking the networks,” i.e., serving as an umbrella mechanism interconnecting geographically dispersed “satellite” national, regional, and coalitional payment systems.  

    Expansion of BRICS grouping to incorporate more Global South nations

    In 2022 BRICS announced that it would consider accepting new members, and in the lead-up to this year’s summit, over 40 nations expressed interest in joining, with 22 nations submitting formal applications and another 20 making informal enquiries.

    At the end of the summit, current BRICS members announced that they have invited six nations, Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE), to become full members of BRICS effective January 1, 2024.

    By including three OPEC nations (Saudi Arabia, UAE, and Iran), BRICS membership will now count six of the world’s top 10 oil producing nations (with almost 50 percent of both global oil production and reserves), and at least four of the world’s top 10 gas producing nations (in total, seven of the top 20) in its fold. By including Argentina, the group now has three of the top five lithium producing countries (Brazil and China being the other two). Recently, Iran also has discovered vast lithium deposits, potentially the world’s second largest reserves. In addition, BRICS includes four of the top five agricultural producing countries (now seven of the top 20). This expanded BRICS group includes seven of the G20 nations, thereby solidifying the input of the Global South.[8]

    South Africa’s Minister of Finance, Enoch Godongwana, has indicated that this is just the first phase of admission of new members. BRICS leaders already have embarked on a second round of discussions, seeking consensus on additional member nations.[9] More countries are still in the queue to join BRICS, with Algeria, Bangladesh, Bolivia, Cuba, Indonesia, Kazakhstan, Kuwait, Thailand, Venezuela, and Vietnam among them. By next year’s summit, BRICS also aims to develop further guidelines for accepting prospective partner countries.

    Fortification and diversification of global supply chains

    In point 33 of the BRICS Summit 2023 final communiqué, the members state: “We encourage further cooperation among BRICS countries to enhance the interconnectivity of supply chains and payment systems to promote trade and investment flows.”

    A cursory glance at a map of the globe will suffice to demonstrate the impact of this new phase of BRICS member expansion on stabilising global supply chains and securing key maritime and overland trade routes. The following graphic from an article by Marcus Lu (and Bhabna Banerjee) is useful[10]:

    Russia–Ukraine conflict

    Addressing the open plenary session of the summit, Ramaphosa said, “BRICS has proven itself to be a credible entity that stands in solidarity and seeks to promote a more equitable global system. We thank you also for the efforts that are being made by a number of BRICS countries to bring about a peaceful end to the conflict between Ukraine and Russia…. We agree that… these types of conflicts are best brought to an end by negotiations…BRICS members will continue to be supportive of the various efforts to bring this conflict to an end through dialogue, mediation and negotiation.”

    Tracia Leacock, Ph.D. is an Independent Research and Content Consultant, with a keen interest in international relations. She may be contacted via Linkedin here.

    [1] The full joint statement for BRICS Summit 2023 is accessible at member states’ government websites. PDF link at South Africa presidency website, “XV BRICS Summit Johannesburg II Declaration,” August 23, 2023, https://www.thepresidency.gov.za/content/xv-brics-summit-johannesburg-ii-declaration-24-august-2023

    [2] In point 10 of the BRICS Summit 2023 final communiqué, the members state: “We call for reform of the Bretton Woods institutions, including for a greater role for emerging markets and developing countries, including in leadership positions in the Bretton Woods institutions, that reflect the role of EMDCs in the world economy.”

    [3] NDB lending in Russian ruble was suspended with the onset of the Russia–Ukraine conflict.

    [4] Michael Stott, Financial Times (FT), August 22, 2023, “Brics bank strives to reduce reliance on the dollar,” https://www.ft.com/content/1c5c6890-3698-4f5d-8290-91441573338a

    [5] Martina Fuchs, Xinhua, August 22, 2023, “Interview: UNCTAD chief urges ‘inclusive multilateral system’ ahead of BRICS summit,” https://english.news.cn/20230822/f8ed708a1c074b2b8f7f2d71bbd96f0a/c.html

    [6] Siphelele Dludla, DFA, August 23, 2023, “BRICS nations reach stalemate on potential common reserve currency,” https://www.dfa.co.za/opinion-and-features/brics-nations-reach-stalemate-on-potential-common-reserve-currency-2e19b006-2340-41a0-ac5a-05256b8befea/

    [7] Reuters, August 24, 2023, “BRICS payment system would not replace SWIFT—S. Africa finance minister,” https://www.reuters.com/world/africa/brics-payment-system-would-not-replace-swift-safrica-finance-minister-2023-08-24/

    [8] See Marcus Lu (and Bhabna Banerjee), Visual Capitalist, August 24, 2023, “Visualizing the BRICS expansion in 4 charts,” https://www.visualcapitalist.com/visualizing-the-brics-expansion-in-4-charts/, for a detailed overview of the impact of the BRICS expansion.

    [9] Nokukhanya Mntambo, Eyewitness News (EWN), August 26, 2023, “Algeria likely to be among second batch of countries to join BRICS—Godongwana,” https://ewn.co.za/2023/08/26/algeria-likely-to-be-among-second-batch-of-countries-to-join-brics-godongwana

    [10] Marcus Lu (and Bhabna Banerjee), Visual Capitalist, August 24, 2023, “Visualizing the BRICS expansion in 4 charts,” https://www.visualcapitalist.com/visualizing-the-brics-expansion-in-4-charts/

  • What’s Happened in Trade since December 2020?

    What’s Happened in Trade since December 2020?

    Alicia Nicholls

    Happy New Year to all of our readers! Since our last Caribbean Trade & Development News Digest was published near the end of December 2020, some major trade developments have occurred. If you missed any of these developments, we will bring you up to speed with the top ones in this article!

    UK-EU begin trading under new trade arrangements

    The United Kingdom (UK) and European Union (EU) received the Christmas present they both wanted. On Christmas Eve (December 24) 2020, political agreement was reached on their future trading terms before the Brexit transition period deadline of December 31, 2020. The deal averts the no-deal scenario, that is, trading on World Trade Organization (WTO) Most Favoured Nation (MFN) terms. Such a scenario would have caused, among other things, the reintroduction of tariffs. This would have been disastrous for both parties, and is a circumstance both sides sought to avoid at all costs, even as contingency plans were put in place in case of the worst case scenario.

    The new EU-UK Trade and Cooperation Agreement covers not just trade and investment, but also deals with issues such as competition policy, fisheries, State aid, tax transparency, among other areas of mutual interest. January 31, 2021 marked the start of the EU-UK’s new trading arrangement. Of course, implementation of the new arrangements have not been without their kinks, including border delays due to the reintroduction of customs checks.  

    The UK-CARIFORUM EPA, which rolls over the provisions of the EU-CARIFORUM, now governs trade between the UK and CARIFORUM countries. The EU-CARIFORUM EPA, of course, remains in effect as between CARIFORUM countries and the remaining EU-27. It remains to be seen what practical impact the new EU-UK trading arrangement may have on CARIFORUM’s trade with the EU and UK respectively, including on supply chains.

    Trading under AfCFTA begins

    Originally slated for July 1, 2020, but delayed due to the COVID-19 pandemic, trading under the Africa Continental Free Trade Agreement (AfCFTA) has officially started from January 1, 2021. A special ceremony marking the Start of Trading was held to mark this historic occasion and the recording may be viewed here.

    The AfCFTA is a landmark trade agreement comprising 54 African countries, with an integrated population of 1.3 billion people and a combined GDP of US 3.4 trillion. It is second only to the WTO as the world’s largest trade agreement. While full implementation of the AfCFTA is not expected for some time, it is expected to help boost economic development on the continent.

    A recent PWC report highlights the ways the AfCFTA could assist African countries in their COVID-19 economic recovery. These include providing the opportunity to reconfigure supply chains, allowing for greater intra-regional sourcing of goods, such as pharmaceuticals, thereby reducing dependence on third countries.

    CARICOM-Africa relations continue to develop and it was announced that the African Union (AU) has offered CARICOM access to approved COVID-19 vaccines from a shipment the AU recently secured.

    EU-China reach agreement in principle on Comprehensive Agreement on Investment (CAI)

    On December 30, 2020, it was announced that the EU and China had reached agreement in principle on the text of a Comprehensive Agreement on Investment (CAI). While the text does not appear to be public as yet, the agreement is said to cover market access for EU and Chinese investors respectively, sustainability commitments and provision for State-to-State resolution of disputes arising under the agreement. The EU and China also commit to try to complete negotiations on investment protection and investment dispute settlement within two years of the agreement’s signature.

    US Section 301 investigations on Vietnam currency valuation and on DSTs

    In December, the US Department of the Treasury designated Vietnam as a currency manipulator. According to the USTR, Vietnam currently enjoys a $55 billion dollar merchandise trade surplus with the US, but a $1.2 billion services trade deficit. In the report on its Section 301 investigation of Vietnam’s acts, policies, and practices related to currency valuation, the USTR concluded that in their totality, they were “unreasonable and burden or restrict US commerce”, but stopped sort of recommending punitive tariffs.

    On the digital services tax front, the USTR has suspended retaliatory duties on French luxury goods, until further notice, which were scheduled to have taken effect on January 6, 2021. On another note, the USTR’s section 301 investigations on digital services taxes adopted by several other countries, including Italy, India and Turkey, found that these countries had placed “unreasonable or discriminatory and burdens or restricts U.S. commerce” but did not recommend any retaliatory action as yet.

    A new direction for US trade policy?

    On January 20, Joseph R. Biden will be sworn in as the 46th president of the US, and it is widely anticipated that this will herald a change from the outgoing administration’s often chaotic trade policy.

    In a key note speech delivered last week, Katherine Tai, the nominee for United States Trade Representative (USTR), provided some idea of the incoming Biden administration’s trade policy priorities, of which China and the USMCA remain foremost. Notable was that there was no mention in Ms. Tai’s speech of the WTO, including the current impasse on the appointment of a Director-General or the Appellate Body crisis. However, further information on the Biden administration’s trade policy priorities and disposition will be gleaned when the USTR releases its report on the President’s trade agenda, expected sometime in February.

    Without doubt, domestic issues, such as COVID-19 vaccine roll-out and economic recovery, are expected to absorb much of the administration’s policy agenda within the first 100 days. Biden has proposed a $1.9 trillion-dollar stimulus package to combat the COVID-19 pandemic and its economic fall-out. Climate change is also one of the policy priorities and Biden has indicated that the US will rejoin the Paris Climate Agreement.

    Despite the outgoing Trump administration’s limited cooperation with the President-elect’s transition team, fate appears to have dealt Biden some fortune on the legislative front. With both Houses of Congress controlled by Democrats (albeit a slim majority in the case of the Senate), Biden should have some breathing space to get his policy agenda enacted, at least for the first two years of his administration.

    US redesignates Cuba as a State Sponsor of Terrorism

    The outgoing Trump administration’s State Department has redesignated Cuba as a state sponsor of terrorism (SST) for allegedly “repeatedly providing support for acts of international terrorism in granting safe harbor to terrorists”. Cuba had been delisted in 2015 under the Obama Administration as part of that administration’s attempts to normalize US-Cuba relations. However, the US’ illegal and unwarranted economic, commercial and financial embargo on Cuba, which requires Congressional action to remove, remains.

    The redesignation of Cuba as a SST is just the latest of several actions taken over the course of the Trump administration, which has seen a hardening of the US’ policies against the island nation. This included, for example, ending the suspension of Title III of the Helms-Burton Act. With regard to the trade implications of Cuba’s redesignation, which is extraterritorial in application, it penalises persons and countries engaging in certain trade with Cuba, bans defense exports and sales, and imposes certain controls on exports of dual use items.

    In a strong statement condemning this unilateral action taken by the administration, the Caribbean Community (CARICOM) argued that “Cuba’s international conduct does not in any way warrant that designation.” CARICOM also unequivocally condemned it as a “further attack on the country adversely affects its international standing and its social, human and economic development”.

    US President-elect Joe Biden, who had been the VP under the Obama administration and part of the efforts at rapprochement, has been critical of the Trump Administration’s handling of Cuba affairs. It remains to be seen what will be his administration’s approach to Cuba policy.

    Post-Cotonou Agreement Text faces opposition by some EU Member States

    Towards the end of last year, the EU and the Organisation of African, Caribbean and Pacific States (OACPS) announced political agreement on the text of a deal to succeed the Cotonou Agreement which was meant to have expired in December 2020. The post-Cotonou agreement is not a trade deal; trade between the EU and the OACPS is covered by the various Economic Partnership Agreements (EPAs). It is, however, the overarching framework for EU-OACPS relations and, therefore, covers EU-OACP cooperation on a variety of political and social issues.

    A Devex exclusive report released last week revealed that some EU states, particularly Poland and Hungary, expressed reservations with the proposed text, especially on the treatment of issues such as sexual education issues and migration and mobility.

    WTO Developments

    According to Bloomberg WTO reporting, in its final General Council meeting for the year held December 16-17, 2020, WTO members approved the WTO’s budget for 2021 and also decided that a Special General Council meeting will be held earlier this year to determine where and when the next Ministerial Council will be held. However, the US maintained its veto on the selection of Dr. Ngozi Okonjo-Iweala as the new Director-General. It remains to be seen whether the Biden administration will maintain the US’ current objection.

    The African Union, Cuba and African Union’s proposal on strengthening the WTO for promoting development and inclusivity was also one of the agenda items. At the meeting, WTO Members were unable to agree on the proposal advanced by several developing country members on amending the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement to facilitate developing countries’ access to COVID-19 vaccines. This week, the countries proposing the amendment released their responses to WTO Members’ questions on their proposal.

    In other developments, India was the first WTO Member to have its Trade Policy Review for 2021. Costa Rica has requested WTO dispute consultations with Panama regarding measures affecting strawberries, dairy products, meat products, pineapples and bananas.

    Caribbean Community (CARICOM) developments

    From January 1, 2021, Prime Minister of Trinidad & Tobago, the Hon Dr. Keith Rowley, has assumed chairmanship of CARICOM under its six-month rotating chairmanship. He took over from then outgoing chairman, the Hon. Dr. Ralph Gonsalves, Prime Minister of St. Vincent & the Grenadines. Dr. Rowley’s statement as incoming Chair may be viewed here.

    CARICOM has already had a busy start to the year. According to a press release from the Community, the Heads of Government last week held their 13th Special Emergency Meeting of the Conference and under Prime Minister Rowley’s chairmanship. Among other things, they received an update on the Caribbean Economic Recovery and Transformation (CERT) Plan.  

    CARICOM IMPACS and the Small Arms Survey signed a Memorandum of Understanding to Reduce Gun Violence in the Caribbean, including support efforts to improve CARICOM Member States’ to prevent the illicit circulation of small arms and light weapons.

    The CARICOM Committee of Ambassadors also met later last week and among other things, reviewed plans for the Thirty-Second Inter-Sessional Meeting of the Conference of Heads of Government slated for 23-24 February 2021. The Community Council of Ministers also convened to, inter alia, advance preparations for the Intersessional Meeting and to approve the CARICOM Secretariat’s Budget for the financial year 2021-22.

    The Secretariat has since the start of the year already released separate statements condemning the US’ designation of Cuba as a State Sponsor of Terrorism and repudiating any Venezuelan aggression in the escalating Guyana-Venezuela border dispute. The latter statement was in response to a statement released by the Maduro Government on January 7, announcing the creation of a so-called “Territory for the development of the Atlantic Façade” in the disputed Essequibo region of Guyana over which Venezuela has repeatedly claimed as part of its territory. An interesting development is that the Brazilian Government has expressed support for Guyana in the matter.

    In its statement demanding greater equality in COVID-19 vaccine dissemination, CARICOM has called for a global summit in the context of the World Health Organisation’s (WHO) ACT-A Facilitation Council to discuss equitable access and distribution of the COVID-19 vaccines.

    Now you are all caught up! We look forward to continuing to follow these developments and more throughout the course of what promises to be a critical year for trade.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. All views herein expressed are her personal views and should not be attributed to any institution with which she may from time to time be affiliated. You can read more of her commentaries and follow her on Twitter @LicyLaw.

  • COVID-19: The Push to Conflict

    COVID-19: The Push to Conflict

    Renaldo Weekes, Guest Contributor

    Renaldo Weekes

    The novel Coronavirus disease (COVID-19): a common threat that has united the world in unprecedented ways. As the pandemic rages on, however, some are getting anxious and want answers. United States (US) officials have accused China of mismanaging the coronavirus response and allege that it originated in a Chinese lab. China responded with allegations that the US military planted the virus in Wuhan. 

    The possibility for escalation is nigh as US President Donald Trump reportedly suggested that China may be punished for its alleged impropriety through new tariffs, sanctions and the lifting of sovereign immunity. As the US seeks to punish China, one wonders what the effects may be on the wider world.

    The Global Economy

    The tariffs being floated by the Trump administration as possible punishments will stifle the global economy since, being the world’s two largest economies, the US and China are very much intertwined in the global economy. Consideration must also be given to how China will retaliate to the tariffs.

    Tariffs, essentially being a tax on imported goods, will make goods more expensive at a time when many businesses and consumers cannot absorb such a cost. What little spending power exists will diminish, further pushing the economy downward. The global economy’s recovery rate will be restricted as supply chains will slowly regain traction amidst low numbers of buyers and sellers. Shocks will hit small open economies especially hard as they greatly depend on foreign production that travels through the US. It is still left to be seen if the US will follow through with such plans however.

    Sanctions have more versatility in the sense that they can be applied to certain businesses or individuals within the US banking system. This is effective because the US has a long reach in the world’s financial system. However, depending on where those sanctions are applied, there could be some disruption in the global supply chain because, as mentioned earlier, China is intertwined in the global system. Again, small open economies that regularly do business with China will be in trouble.

    The lifting of state sovereign immunity allows American citizens and the American Government to sue China for COVID-related issues. Removal of sovereign immunity may have at least two effects. First, it allows the US wants to fight China with its own rules by allowing lawsuits. Secondly, if state-owned or state-related Chinese businesses in US jurisdictions are entangled in lawsuits, China will have to decide if staying in the US is worth the retaliatory lawsuits or risk relocation which may cause disruptions in supply chains.

    Political

    Considering the implications of this clash to the wider world, both parties have been working to push their narrative to their partners for support. This puts a number of countries with mutual relationships in an awkward position as they must now play chess with their words and actions which, as seen through Australia and the European Union (EU), is quite difficult. 

    Australia has, just like the US, called for an investigation into the virus’s origins but has stopped short of saying the virus came from a lab. To China, not overtly opposing those claims is implicit support of the US’ claims and in response, Chinese Ambassador to Australia Cheng Jingye suggested a possible shift in trade relations between the two countries. Acting on those words, China has suspended beef imports from Australia. This underscores China’s willingness to use its economic might against countries politically opposed to it. Such tactics may hurt Australia as China accounts for 36 percent of Australia’s total annual exports. Though both countries claim that the issue is separate from the pandemic, it is hard to defend that point considering the veiled threat laid by the Chinese ambassador. One must ask whether it is possible to separate the two incidents or if it would have happened but for the call for an investigation.

    The EU has been under the spotlight for editing a report related to disinformation campaigns by China to appease China and for allowing China to censor an opinion piece written by the EU’s ambassador to China. The EU’s move is seen as bending more toward China by editing its report and allowing China to censor its piece. Added to this is reporting that the European External Action Service (EEAS), responsible for the bloc’s foreign policy, has been rife with problems related to each EU member state wanting to follow its own agenda. This suggests no real coordinated effort toward handling the issue and a weakening of the EU’s position as this may, theoretically, give China an opening to further cement this divide.

    Despite what may appear to be the case, EU member states have stood up to China. It is reported that China attempted to encourage German Government officials to make positive spins on how it has been handling the virus but it was quickly shot down. France hastily summoned its Chinese ambassador when a Chinese diplomat wrote a piece criticising Western countries on their treatment of the elderly. President of France Emmanuel Macron and German chancellor Angela Merkel have both called for investigations into the origins of the virus but, similar to Australia, have not claimed that the virus came from a lab. Joined with that is the EU’s support of the US’ push for an investigation into the coronavirus’s origins at the WHO general assembly. These examples show that the EU is not necessarily bowing to China. Considering the historically friendly relationship between the two, the EU would not have the same motivation as the US to immediately dismiss China.

    Even the World Health Organisation (WHO)?

    The WHO itself has been dragged into the fray by the US as the Washington has suspended its WHO funding due to accusations that that UN agency facilitated China’s hiding of coronavirus statistics. Such an accusation suggests that the WHO abdicated its duty in order to appease China. The US’ actions also serve to weaken the WHO’s ability to help the world at large; more so those who cannot help themselves. Allowing a spat to spill over into the UN agency for health during a pandemic is seen by many critics as a way for the Trump administration to deflect any blame it is receiving for its handling of the virus domestically; especially since a Presidential election is due this November.

    Conclusion

    COVID-19 has led to a pandemic that took the world by surprise. Most people did not think that a virus in China would spread to the world. Nevertheless it has and people’s magnanimity has shown through like never before. However, it has devolved into a blame game between the world’s most powerful countries about how the pandemic started, capturing many other countries in the fray. But for the pandemic, would the US and China be in this situation? Probably not, but here we are. The only real way for this situation to stop is if the US recants or if China admits fault. At this point, neither seems likely. One can only hope that the war of words between the two countries does not escalate to a point of no return that drags the rest of the world down as a result.

    Renaldo Weekes is a holder of a BSc. (Sociology and Law) who observes international affairs from his humble, small island home. He has keen interest in how countries try to maneuver across the international political and legal stage.

  • Has Canada become Collateral Damage in the US-China Trade War?

    Has Canada become Collateral Damage in the US-China Trade War?

    Renaldo Weekes, Guest Contributor 

    The trade tensions between the United States (US) and China have subsided for a while as each side has promised not to introduce new tariffs during a 90 day period starting from December 1, 2018, when US President Donald Trump and Chinese President Xi Jinping had a dinner at the G-20 summit in Argentina. Negotiations resume on January 7, 2019 and, so far, it seems that not much has changed as both have committed to their previous stances on the matter. However, the overall context of the negotiations has changed. Canada has arrested Huawei Technologies Co., Ltd’s Chief Financial Officer Meng Wanzhou at the US’ request. Shortly thereafter, China arrested two Canadian citizens, Michael Kovrig and Michael Spavor. Many see China’s actions as a tit-for-tat response to Meng’s arrest and wonder if Canada will now become collateral damage in a trade war between the US and China.

    Why were Meng and the Canadian duo arrested?

    Meng has been accused by the US of allegedly violating its sanctions on Iran by defrauding multiple US banks. On a layover in Canada, she was arrested by Canadian authorities on request from the US. She has since posted bail and is required to wear an ankle monitor and stay in her residence from 11 p.m. until 6 a.m. Kovrig and Spavor were arrested on suspicion of engaging in activities that were considered as breaching national security. The pair reportedly is subjected to three interrogations a day, must sleep with the lights, does not have access to legal representation and can only have consular visits once a month. Both Canada and China have denied that the arrests of the Canadian pair are related in any way to the arrest of Meng Wanzhou but Canada has said that the arrests were unfounded.

    Did Meng’s arrest influence Kovrig and Spavor’s arrests?

    Some may see it as a coincidence that Kovrig and Spavor, both Canadians, were arrested in China shortly after Meng, a Chinese heavy-weight, was arrested in Canada. As mentioned earlier, both countries have denied that the arrests are related. However, some persons, including former diplomats, are quite sure that the opposite is true. Reportedly, Chinese officials are concerned about Meng’s arrest. A Canadian parliamentary delegation, currently in China, has engaged in talks with Chinese officials about the pair of Canadians they arrested.  The officials demanded to know why Canada arrested Meng. It is public knowledge that Canada has detained Meng for bank fraud on the US’ request but it seems as though the Chinese believe there is more to the arrest than meets the eye. Fearing the worst, they may have retaliated by detaining two Canadians in order to keep Canada in check. It seems probable that Meng’s arrest had an impact China’s decision to arrest the Canadians.

    Do the arrests have an effect on the trade war?

    The trade war between the US and China has been quite contentious as each side continually laid tariffs on the other party’s goods until recently. When dealing with any high stakes negotiation such as this one, persons may wonder if external issues would impact the talks. This is especially the case in the current situation as the US has pointed out many problems it wants China to fix such as alleged forced transfer of intellectual property from foreign companies and restricted market access. There is also the issue of the disputed South China Sea where, as recently as today (Monday, January 7, 2018), China claimed that the US violated its domestic and international law by performing acts interpreted as provocation near the sea.

    As it relates to the arrests, China’s actions may be ostensibly seen as its modus operandi whenever one of its citizens is arrested overseas, and not related to the trade war. In a previous tit-for-tat situation in 2014, Canadian aid workers Kevin and Julia Garratt were detained for the same national security reasons as the pair of Michaels shortly after Canada arrested Su Bin, a Chinese man wanted for industrial espionage in the US. Mrs. Garratt was released on bail while Mr. Garratt remained detained for more than two years until his eventual deportation, which occurred after Su Bin was extradited to the US and sentenced.

    However, as mentioned earlier, Chinese officials seem to believe that Meng’s arrest was political. One may infer that the Chinese may not want the US to receive Meng as this may give additional leverage to the US in the trade talks. China’s paranoia may have been bolstered by comments President Trump made which insinuated that Meng’s arrest may assist in securing the “the largest trade deal ever made.” China may, therefore, seek to create its own leverage by punishing Canada, a US ally, in whatever way it can. China may refrain from committing any additional acts that directly affect the US but still continue current acts with which the US is concerned.

    Canada’s situation

    Canada is in a sticky situation. China will continue to punish Canada until it secures Meng’s release. Though it is a US ally, Canada’s citizens are the ones being used as pawns in China’s game so it will have to navigate this situation mostly on its own merit. This situation can be, theoretically, immediately remedied by Canada releasing Meng, rejecting the US’ extradition request. China may likely release the Canadians in return and refocus its attention solely on the US. However, this decision cannot be made lightly. Should Canada disregard all credible evidence of Meng’s crimes in order to appease China or will it repeat its 2014 decision of extradition? When weighing this decision against the well-being of your own citizens, it is not an easy decision to make. Canada must keep in mind that this is not a simple tit-for-tat situation for China as is usually the case but a piece on the battlefield. China cannot allow the US to gain what it sees as additional leverage. This ostensibly personal spat is being fought against the backdrop of the US-China trade war.

    If Canada arrested Meng outside of the context of a trade war between the US and China, the situation probably would have been the same. The US would have still made the request to Canada as Meng’s arrest was predicated on her committing bank fraud with the intent of violating the US’ sanctions on Iran. China would have still arrested the two Canadians in retaliation since this is its established modus operandi. The weighing of Meng’s crimes versus its citizens’ well-being would still be an issue. As mentioned earlier, the US has a number of issues with China’s actions. Therefore, if not the trade war, Canada may have been collateral damage in some other dispute. It is safe to conclude that Canada is indeed collateral damage in the US-China trade war. However, the trade war is just the biggest of many disputes that have the potential to create more collateral damage.

    Renaldo Weekes is a holder of a BSc. (Sociology and Law) who observes international affairs from his humble, small island home. He has keen interest in how countries try to maneuver across the international political and legal stage.