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From “China Shock” to deglobalisation shock: China’s WTO accession and US economic engagement 20 years on

I have a new report out with USSC, From “China Shock” to deglobalisation shock: China’s WTO accession and US economic engagement 20 years on.

Main points are as follows:

• China’s accession to the World Trade Organization (WTO) in 2001 was an important element of its growing integration into the world economy, as well as its domestic economic reform program dating back to 1978.

• In terms of access to US markets, accession only served to make permanent access China enjoyed since the 1980s.

• “China shock” literature highlights the number of US manufacturing jobs lost to import competition from China in previous decades.

• However, a broader assessment of the economic impact of the “China shock” suggests it has been a net positive for the US economy.

• US policymakers are increasingly critical of the role of the World Trade Organization and its failure to discipline China’s trade and industrial policies, but Australian policymakers see G7-led WTO reform as a key element to push back against China’s coercive economic diplomacy.

• President Trump’s trade war and sanctions against China led Chinese elites to equally question the extent of economic interdependence with the United States. President Xi Jinping revived the Maoist concept of “self-reliance,” explicitly citing the rise of foreign unilateralism and trade protectionism as a motivation.

• Far from calling out and disciplining China’s behaviour, President Trump’s trade policies, maintained by the Biden administration, have encouraged China to double-down on its state-led development model and strategic industry and trade policy, while potential multilateral solutions and processes have been neglected and under-utilised.

• The growth in discriminatory trade measures among G20 economies since the global financial crisis in 2008 demonstrates that the problems in the multilateral trading system are not specific to China.

• A key to restoring domestic political support for US leadership of the multilateral trading system is to reframe that leadership in terms of strategic competition with China around the rules and norms of the global economy.

• Effective US leadership of the multilateral trading system would not only promote US foreign policy objectives such as prosecuting its strategic competition with China but would also discipline US domestic economic policy in ways that better serve its economic interests. It also provides a rules-based framework to manage trade frictions arising from climate mitigation under the Paris Agreement and growth in the digital economy.

posted on 24 January 2022 by skirchner in Economics, Free Trade & Protectionism

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Xi’s rightly wary of Fed tightening

I have an op-ed in the AFR explaining why Chinese President Xi Jinping will be eyeing a prospective Fed tightening warily and why the RBA will lag the Fed. Full text below the fold.

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posted on 19 January 2022 by skirchner in Financial Markets, Monetary Policy

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Australia has become a net exporter of human and financial capital

I have an op-ed in the AFR noting that Australia has become a net exporter of human and financial capital. I argue that reversing these net outflows should be a priority for post-pandemic recovery. Full text below the fold. Note AFR is responsible for ‘savings’ instead of ‘saving’!

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posted on 22 December 2021 by skirchner in Financial Markets, Free Trade & Protectionism, Population & Migration

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The Reserve Bank of Australia’s pandemic response and the New Keynesian trap

The latest issue of Agenda includes a symposium on Economic Policy during Covid. Includes a contribution from me on ‘The Reserve Bank of Australia’s pandemic response and the New Keynesian trap.’ Note text was finalised mid-year. A lot of water under the bridge since then.

posted on 10 December 2021 by skirchner in Economics, Monetary Policy

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China’s WTO Accession and US Economic Engagement 20 Years On

I have an article in Australian Outlook marking the 20th anniversary of China’s accession to the WTO and recent debates about US economic engagement with China.

posted on 09 December 2021 by skirchner in Free Trade & Protectionism

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Omicron is the least of the problems for global trade

I have an op-ed in the AFR noting that logistics are the least of the problems facing the WTO’s MC12 when the world’s two largest economies no longer seek greater integration.

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posted on 30 November 2021 by skirchner in Free Trade & Protectionism

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A Geoeconomic Alliance: The Potential and Limits of Economic Statecraft

I have a new report out with the United States Studies Centre, A Geoeconomic Alliance: The Potential and Limits of Economic Statecraft. The report examines the history and application of economic statecraft and its relevance to the Australia-US alliance and US-China strategic competition. An important theme that emerges from the report is the limits to economic statecraft in pursuing geopolitical objectives. In particular, China’s economic statecraft has prompted defensive reactions in target countries, including strengthening cooperation with the United States.

There is a short version in Australian Outlook.

posted on 30 September 2021 by skirchner in Economics, Foreign Affairs & Defence, Foreign Investment, Free Trade & Protectionism

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Countering China’s trade coercion should be alliance agenda

I have an op-ed in the AFR arguing that China’s economic statecraft, including its attempted coercion of Australia, has mostly been unsuccessful in promoting its geopolitical objectives and may prompt a collective allied response.

posted on 21 September 2021 by skirchner in Economics, Foreign Affairs & Defence, Free Trade & Protectionism

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US investors cool on Australia

I have an op-ed in The Mandarin summarising my latest report on the Australia-US bilateral investment relationship. Text below the fold.

There is an even longer version in Australian Outlook.

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posted on 06 July 2021 by skirchner in Foreign Investment

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Australia-US bilateral investment in 2020: Taxing times

I have a new report out with the United States Studies Centre, Australia-US bilateral investment in 2020: Taxing times. The report highlight Australia’s underperformance in attracting US investment since the passage of President Trump’s Tax Cuts and Jobs Act in 2017. While President Biden’s proposed corporate tax changes will improve Australia’s attractiveness on a relative basis, they also weigh on US corporate investment globally, with ambiguous implications for future US investment in Australia.

US direct investment in Australia is not completely fungible with other forms of foreign capital inflow. Many of the benefits of FDI, like knowledge and intellectual property transfers, access to managerial talent and global supply-chains is firm- and country-specific. The US remains the world’s most innovative economy and US FDI abroad is a major channel through which US productivity gains spillover to the rest of the world, including Australia. Portfolio investment and investment from other countries is not a perfect substitute for US direct investment.

posted on 05 July 2021 by skirchner in Foreign Investment

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G7 tax deal is a threat to reformers

I have an op-ed in the AFR arguing that the G7’s proposed cartelisation of the international tax system threatens reform-oriented small open economies, but Australia could perversely benefit given its high tax burden on capital. Ironically, the proposed 15% minimum corporate tax could backfire and become a floor target for international tax competition. Full text below the fold.

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posted on 08 June 2021 by skirchner in Economics

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Higher corporate taxes make paying for Biden’s spending harder

I have an op-ed in the AFR noting that the Biden Administration’s proposed higher corporate tax rate will penalise US companies relative to foreign competitors and reduce investment and incentives to produce in the US relative to the rest of the world.

posted on 04 May 2021 by skirchner in Fiscal Policy

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National security looms large for foreign investment

I have an op-ed in The Mandarin arguing that the government needs to articulate clearly and transparently the reasons for rejecting foreign acquisitions to minimise foreign investment uncertainty and its economic effects.

posted on 20 April 2021 by skirchner in Foreign Investment

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A Foreign Investment Uncertainty Index for Australia and the United States

I have a new report out with the United States Studies Centre, A Foreign Investment Uncertainty Index for Australia and the United States. The index helps quantify the uncertainty generated by our regulation of FDI at the border and its economic implications.

John Kehoe writes up the story in today’s AFR. Michael Heath also has a story in Bloomberg.

posted on 16 April 2021 by skirchner in Foreign Investment

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Reforming Australian Monetary Policy: My New Working Paper for the Mercatus Center

Last year, Scott Sumner invited me to contribute to the Mercatus Center Working Paper series on the topic of Australian monetary policy and how a nominal income targeting regime might be implemented in a small open economy. You can read the research summary here and the full paper here.

posted on 28 January 2021 by skirchner in Monetary Policy

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