Below is the weekly update of political developments across East Asia. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail.
CHINA/AUSTRALIA/US: Canberra’s WTO challenge to Chinese tariffs creates dilemma for Washington
The Australian government has formally appealed with the World Trade Organization against China’s 80.5% tariffs on Australian barley. Australia’s trade minister acknowledged that the case may take years to resolve but said that the country had little choice. The appeal begins a formal 60-day period for the two countries to first attempt to resolve the issue through negotiation. If that fails, the WTO will convene a three-person adjudication panel to investigate. The Chinese tariffs on barley are part of a broader collapse of the Sino-Australian relationship that has prompted Beijing to impose tariffs or other trade restrictions on barley, beef, wine, timber, cotton, copper, and lobster.
If the adjudication panel rules against China, Beijing can appeal the decision. At that point, the case would stall unless the US removes its block on the appointment of new members to the WTO’s Appellate Body, which has not been functioning since December 2019 in protest against alleged overreach in the body’s previous rulings. US President-Elect Joe Biden has not said whether he would remove the block. Some have suggested that the US should approve the appointment of new appellate judges on the condition that US-China trade disputes not be subject to the Appellate Body’s decisions. Biden is unlikely to remove Trump’s trade war tariffs against China, at least initially, but a WTO adjudication panel ruled in September that their imposition violated WTO rules. If the Appellate Body resumes functioning, it would provide legal justification for Chinese retaliatory tariffs against the US.
JAPAN: Suga grilled over steak dinner as Covid-19 cases continue to surge
Prime Minister Yoshihide Suga’s political woes worsened this week after he was found to have attended a steak dinner on 14 December with Liberal Democratic Party (LDP) Secretary-General Toshihiro Nikai and at least five other diners, at the same time that his medical advisory panel has recommended that the public avoid meals out with more than five people. While Suga’s allies in the government and the LDP have rushed to defend the prime minister – Yasutoshi Nishimura, minister responsible for the Covid-19 response, suggested that avoiding groups larger than five was not a fixed rule – Suga has faced pointed criticism from LDP lawmakers and the leadership of the LDP’s coalition partner Komeito, in addition to the expected criticism from opposition lawmakers. Suga likely did not help matters when he suggested that his conduct “invited public misunderstanding.” In order to avoid similar accusations of hypocrisy, the LDP’s factions have canceled their end-of-year parties.
Suga’s flouting of his own government’s recommendations risks further weakening his approval ratings, which have already begun plummeting as disapproval grows of his handling of Japan’s third wave of Covid-19 infections. His timing is particularly poor because the steak dinner scandal comes as Japan has continued to set new records for cases and severe cases. Authorities reported 3,212 new cases on Thursday, 17 December as Japan, a new record for the first time in five days. This number included 822 cases in Tokyo, a new record that surged past the previous day’s record of 678. Severe cases and the daily death toll remain elevated as well, and prefectural governments have continued to warn of the growing strain on the healthcare system. While it is still possible that Suga could contain the outbreak in the coming weeks, his own party is increasingly concerned that the prime minister has failed to take the threat posed by the widening outbreak seriously, and therefore his attitude could be as much of a political liability as his policy missteps.
PHILIPPINES: Key reform legislation suffers delay
Congress failed to pass a bill that would reduce corporate income taxes and streamline the process for the grant of incentives to investors before it went on break for the holidays. Expectations that congress would approve the bill, called the Corporate Recovery and Tax Incentives for Enterprises (CREATE), had increased in late November after a key lower house leader had said that the chamber would adopt the Senate version to obviate the need for a meeting between the two houses – called a bicameral conference committee (bicam) – to reconcile their different versions. The House had approved its version of CREATE in September 2019 and President Rodrigo Duterte has certified the legislation as being urgent.
Instead, the House not only failed to adopt the Senate’s bill, but also sent a letter to the upper chamber on 15 December that it would be seeking a bicam. However, since that was the last day of Senate sessions on the floor, it meant that the bicam and approval of the law would have to be put off for next year. It is likely that the House wants not only parts of its bill included in the Senate version, but may also add items. The bicam process is supposed to only consider provisions contained in both versions, but congress has treated the process liberally – allowing for the insertion of new amendments. The process had been challenged in the past in court, but the Supreme Court has ruled the matter to be beyond its jurisdiction due to the separation of powers.
CREATE has been contentious because exporters claim that changes in the incentive-granting system would discourage foreign investors. The House-initiated delay likely indicates an effort by the opposition to the bill in the lower chamber to increase their bargaining position to dilute the changes in the Senate’s version, not to prevent its passage into law. Nonetheless, congress’s failure to pass what is one of the most closely watched reform bills of the Duterte government will generate uncertainty about its approval until legislature resumes session and the intention of the House becomes clearer.