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Who’s to take center stage on trade?

Tags: TRADE US China EU TTIP

If you follow modern commentary, it is perceived wisdom that the European Union (EU) faces existential problems — Brexit and the complications to the Trans-Atlantic Trade and Investment Partnership (TTIP) arising from a Trump presidency can scarcely be overstated in terms of the challenges they bring to the EU.

However, it would be remiss to not look at ways in which these could be opportunities for the Union. Much has been said about how the EU will negotiate and extract advantage from the United Kingdom leaving the EU in the next few years, but the new US administrations’ trade protectionist stance and the resulting gap on the world stage of free trade is possibly the real opportunity.

Although still unclear, it seems plausible the new US administration is looking set to abandon or at least deep-freeze the TTIP talks. Besides, the US exit from the Trans-Pacific Partnership (TPP) have left in pieces the perception from many commentators that Trump would moderate in power, and that his trade rhetoric was aimed at winning over workers in rust belt states — we need to engage with the fact that he is very serious about this.

When you add in recent comments that his administration thinks future trade deals should have renegotiation clauses — specifying that any trade deal where the USA becomes a net importer should be automatically subject to renegotiation — it is clear that the USA is no longer serious about promoting multilateral and/or free trade on the world stage.

So how does the EU benefit from this? Now that the USA has exited stage left, a lot of people are looking to the Chinese government in Beijing for answers. Being fairly isolationist historically, China has started to dip its toes in the international waters. Up until now, it has concerned itself with spreading soft power through the use of exports and foreign investments — particularly infrastructure development. Might it, as some commentators are suggesting, use this opportunity to insert itself where the USA is withdrawing? Judging by recent rhetoric from Chinese President Xi Jinping, China seems keen to step up its game on international trade. And where would this leave the biggest trade power in the world, the EU, which is has been a strong, successful and longstanding free trade advocate?

One thing is clear: the most concerned international partners are betting on both horses. Australia’s Foreign Minister Julia Bishop’s comments on partnering with the Republic of Ireland in order to take advantage of the opportunities Europe’s Single Market offers was both seen as a significant rebuke to the UK post-Brexit, but also as an admission that leading powers still saw the EU as one of the only games in town. There are other examples: Japan and the EU are pressing ahead with their bilateral free trade agreement negotiations, and the EU and Mexico recently agreed to accelerate the pace of their ongoing talks. Similarly, the Australian Premier Malcolm Turnbull leaving the door open to China upon the USA’s exit from TPP was significant . What these instances are showing is that, in both foreign relations and in terms of world power, the sands are shifting.

The very real possibility we have in the next few years are of both the UK and the USA — the global powers that have dominated the international trading system for centuries — seeing their influences being curtailed. The possibility of both dwindling to irrelevance are next to naught given the way in which they have established themselves, but if modern events have told us nothing else: anything is possible.

 

Please note that the views of our guest bloggers do not necessarily reflect the views or position of the Alliance for Responsible Commerce and ARC.trade.

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