China and Pakistan have proposed a “joint ministerial statement” on “strengthening the resilience and stability of global industrial and supply chains” to be issued at the World Trade Organization’s 13th ministerial conference, our correspondent writes.
In their proposal (WT/GC/W/891/Rev.1), China and Pakistan said the ministerial statement recognizes the severe impact of the “pandemic, geopolitical conflicts, coupled with protectionist and unilateral measures” on global supply chains.
Significantly, it comes close on the heels of a telephone call between the Chinese trade minister Wang Wentao and the US Commerce Secretary Gina Raimondo on January 11 during which the top Chinese trade official expressed grave concern about the unilateral trade sanctions imposed by the
US preventing third countries from exporting lithography machines to China and other export controls.
China appears concerned by how the United States is not only stopping the supply of critical chips supplied by Nvidia but also forcing other foreign companies like the Dutch firm ASML from sending lithography machines to China.
In its three-page proposal, the two countries argued that maintaining the stability of “global industrial and supply chains” is a sine-qua-non for the smooth operation of the international economy.
Narrating the productive role played by global supply chains in “economic globalization” since the 1980s, China and Pakistan said, “These chains are exposed to risks and vulnerabilities such as political conflicts, policy interference, and force majeure like natural disasters.”
Given the spate of protectionist policies since the 2008 global financial crisis, China and Pakistan noted that “the G20, APEC (Asia-Pacific Economic Cooperation), and other mechanisms have pledged both standstill and rollback of such protectionist measures.”
According to the China-Pakistan proposal, “the Multilateral Trading System with the WTO at its center has played a positive role in the smooth and efficient operation of industrial and supply chains.”The two countries argued that the continued disruptions are hindering global trade.
Despite the WTO Secretariat’s efforts to “explore causes and solutions for the soaring freight costs and transport congestion hindering global trade, and to promote understanding and collaboration among stakeholders from every link in global supply chains”, there is little change as shown by a WTO Secretariat report in February 2023.
That report indicated that “the opportunity costs of decoupling into two rival blocs relative to more liberalization are estimated at 8.7% of real income at the global level, varying between 6.4% for developed countries, 10.1% for developing countries, and more than 11.3% for least developed countries.”
Due to the continued disruptions in the functioning of the global supply-chains, China and Pakistan said “it would be more difficult for poor countries, small and vulnerable economies, landlocked developing countries, as well as MSMEs (micro, small, and medium enterprises) to integrate into the global industrial and supply chains.”
Worse still, the poor countries “might even be squeezed out of those chains, further exacerbating global development imbalance.” China and Pakistan argued that “industrial and supply chains take shape as the result of global division of labor against a background of economic globalization” and “they represent important global public goods.”
Therefore, “only by maintaining the resilience and stability of global industrial and supply chains can the cake of the world economy become bigger and more benefits be delivered to the people of all Members.”
In the current post-pandemic context, according to China and Pakistan, “it is more urgent than ever to maintain the stability of global industrial and supply chains.”
At a time of seemingly rapid fragmentation of the multilateral trading system, China and Pakistan said “An open, non-discriminatory and predictable Multilateral Trading System is helpful for alleviating the adverse impact of supply shortages on industrial chains.”
The two proponents called on WTO members to “adopt a responsible attitude, strengthen cooperation, restore the stable operation of global industrial and supply chains as soon as possible, and promote steady recovery of the world economy.”
Against this grim backdrop, China and Pakistan said “the 13th WTO Ministerial Conference should issue a joint Ministerial Statement” by recalling the “MC12 Ministerial Declaration on the WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics on the importance of preventing unnecessary disruptions in supply chains.”
It emphasizes that “maintaining the openness, efficiency, stability and resilience of the global and regional supply chains is crucial for promoting international trade and investment.”
The multilateral trading system must provide “institutional safeguards for enhancing the resilience and stability of industrial and supply chains.” It recognizes that “the restrictive measures related to the pandemic, geopolitical conflicts, coupled with protectionist and unilateral measures, have severely impacted global supply chains.”
The two countries want WTO Members to “agree to cooperate” in a dozen areas. They include:
1. Endeavor to promote openness and inclusiveness, firmly uphold the multilateral trading system, abide by WTO rules, strengthen the resilience and stability of global industrial and supply chains, and promote global division of labor and cooperation.
2. Promote trade liberalization and facilitation, oppose protectionism and unilateralism, reduce unnecessary trade barriers, and jointly foster a free, open, fair, non-discriminatory, transparent and predictable market environment.
3. Make efforts to remove trade restrictions related to the COVID-19 pandemic and avoid disruptions to global industrial and supply chains. Implement the MC12 Ministerial Decision on TRIPS, decide as soon as possible on its extension to cover COVID-19 diagnostics and therapeutics, and enhance the capacity of developing country Members to participate in the industrial and supply chains of vaccines, diagnostics, therapeutics, and other products.
4. Implement the WTO Trade Facilitation Agreement (TFA). Strengthen exchanges and cooperation in areas such as simplifying and streamlining customs procedures, improving international logistics efficiency, and enhancing connectivity. Encourage more collaboration among international logistics companies to ensure smooth transportation in supply chains. Fully leverage the WTO Trade Facilitation Agreement Facility (TFAF) to provide technical assistance and enhance capacity building to developing country Members.
5. Strengthen exchanges and cooperation on trade in services to address barriers to trade in services. Facilitate cooperation activities among government authorities, industry associations, businesses and the academia on areas such as business opportunity matchmaking, capacity building, trade in services statistics, trade in services standards, and professional service and related business services.
6. Make efforts to deepen cooperation in technological innovation and cooperation, focus on trends in technological development, and encourage enterprises of different Members to cooperate in joint technological research and development in various segments of industrial and supply chains, to jointly promote technological progress and industrial development.
7. Encourage green ways of life and work, promote the application of green technology, green manufacture, and green products in various fields and segments, jointly build green and low-carbon industrial and supply chains, and avoid protectionism in the name of the environment, to address climate change, environmental pollution, resource shortage, and other common global challenges facing humanity.
8. Explore the opportunities brought by the digital economy and digital technologies, tap into the important role of new-generation information technologies in promoting industrial upgrading and economic recovery, advance innovation and application of new technologies, strengthen cooperation in industrial ecosystems, work to accelerate the development of digital, networked and intelligent industries, and facilitate the transformation of production modes. Deepen exchanges and cooperation in e-commerce, promote the wide application and development of e-commerce around the world, and accelerate the formulation of international rules for e-commerce.
9. Encourage key industries such as integrated circuits, new energy, and biomedicine to make better use of global resources, support businesses in cooperation with their upstream and downstream partners along their industrial chains, and jointly ensure sustainable supply in key sectors.
10. Take into full consideration the challenges faced by developing country Members, especially the LDC Members, as well as MSMEs, and encourage other Members to provide capacity building and technical assistance to help them increase added value and integrate into global and regional industrial and supply chains.
11. Encourage Members to share best practices and case studies on improving the resilience of industrial and supply chains with measures in compliance with WTO rules to increase crisis responsiveness at the Council for Trade in Goods and other relevant WTO regular meetings.
12. Encourage the WTO Secretariat to conduct comprehensive studies on industrial and supply chains, to enhance dialogues with relevant international organizations, the private sector and the academia, and to put forward policy recommendations on the basis of such dialogues to promote the stability and development of global industrial and supply chains.
Even if the ministers agree to this statement at the MC13, it remains a best endeavor outcome with little binding effect.
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