The Wall Street Journal (WSJ) recently released a story wherein it cited the increased US dominance in the global dispute mechanism after the phase-one trade deal.
Key quotes
The phase-one deal between the U.S. and China could upend the way trade disputes are settled globally, giving the U.S. an edge over competitors and weakening international institutions.
The Trump administration has crippled the WTO dispute-resolution system by not approving new judges and has made parts of the arbitration system weaker in the U.S.-Canada-Mexico Agreement than in the North American Free Trade Agreement it replaced.
Instead of deferring to arbitrators, disputes under the phase-one deal will be addressed through three rounds of negotiations between the two sides, ultimately giving the U.S. the right to impose tariffs if it isn’t satisfied with the outcome.
FX implications
This should ideally weigh on the market’s risk sentiment as showing the US gains and Chinese losses after the phase-one, also highlighting the fears of breaking the deal. However, neither the USD/JPY nor Gold show any reaction to the news.
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