Date
23 September 2017
President Xi Jinping and Belgium's King Philippe visit a Volvo Cars plant in Ghent
President Xi Jinping and Belgium's King Philippe visit a Volvo Cars plant in Ghent

Europe plays pivotal role in trilateral economic relationship

President Xi Jinping’s proposal that China and the European Union explore a free trade agreement is a sign of Europe’s pivotal role in the trilateral economic relationship among the United States, the European Union and China.

Especially significant was the Chinese leader’s assertion in a speech delivered in Belgium that such a China-Europe relationship would make the two “the twin engines for global economic growth”, making no mention of the US.

“Together we make up one-third of the global economy,” Xi said. “We must actively explore the possibility of a free trade area and the goal of bringing bilateral trade to US$1 trillion by 2020. We must work to make China and the EU the twin engines for global economic growth.”

While an FTA between China and the EU is not likely in the near future, the Chinese leader, by holding up such a possibility, provides additional momentum to the current negotiations between China and the EU on a bilateral investment treaty.

A joint statement issued at the end of Xi’s visit to EU headquarters held open the possibility of “a deep and comprehensive FTA, as a longer-term perspective”, after the successful conclusion of an investment agreement.

China last year overtook the US to become the world’s biggest trading nation. It is now the biggest trading partner of well over a hundred countries, a position that used to be held by America.

The EU is China’s biggest trading partner, while the EU’s biggest trading partner is the US, with China coming in second. China and the US are each other’s second largest trading partner, with the US having a bigger trading relationship with its neighbor, Canada.

Interestingly, the Chinese president’s visit to Brussels came only days after a visit by US President Barack Obama. During that visit, the US and the EU reaffirmed their commitment to “conclude expeditiously a comprehensive and ambitious Transatlantic Trade and Investment Partnership (TTIP) that will strengthen an economic partnership that already accounts for nearly half of global output”.

China is clearly troubled by the TTIP talks. Meanwhile, negotiations on a Trans-Pacific Partnership (TPP) are already taking place involving the US and 11 other countries, not including China, which account for about 40 percent of the global economy.

If these two sets of trade talks are successfully concluded, China may find itself put in a disadvantageous position vis-à-vis its trading partners.

American and European officials have presented the transatlantic talks as being at least in part a response to China’s rise and an attempt to write their own trade rules before China becomes so dominant that it is in a position to dictate its own rules.

Meanwhile, trade talks involving China and 15 other countries, including all 10 ASEAN members, to create a Regional Comprehensive Economic Partnership (RCEP), are encountering problems. The other RCEP countries are Australia, India, Japan, South Korea and New Zealand. Countries involved in the RCEP negotiations account for almost 30 percent of the global GDP.

The TPP and RCEP negotiations are often seen as being in competition, even though there is an overlap in member countries.

An article by the state agency Xinhua indicated that one of RCEP’s problems is that an increasing number of countries involved are showing interest in being part of the TPP talks. Japan became a TPP partner country in 2013 and South Korea has indicated interest in the grouping, as have the Philippines and Thailand.

“The RCEP cannot avoid the region’s other free trade agreements,” Xinhua quoted an unidentified Australian representative as saying. “Bilateral free trade agreements already existed between ASEAN countries, and other six partner countries of the RCEP need to become an integral part of RCEP talks.”

A commentary published in the online edition of the People’s Daily said the Xi visit reflects the trend of Sino-EU ties. “The fact that the US has eavesdropped on the heads of state or governments of both friends and foes indicates that the US does not consider the EU as an equal partner,” it said.

What China is calling for is a partnership with Europe or, as the Global Times newspaper put it, a “partnership of two civilizations”.

“If Europe can support China’s rise,” the Global Times said, “it will be the continent’s decisive strategic innovation. China is the springboard for Europe to re-enter the center stage of the world in the 21st century.”

China’s audacious attempt to split Europe and the United States is likely to be very difficult, even after the Chinese economy becomes the world’s largest, especially if the two sides of the Atlantic Ocean manage to reach a consensus on trade and investment first.

– Contact us at [email protected]; Twitter:@FrankChing1

CG

 

Frank Ching opened The Wall Street Journal’s Bureau in China in 1979. He is now a Hong Kong-based writer on Chinese affairs.

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