As Donald Trump’s hate for the European Union thaws into love, could China be left out in the cold?
Cary Huang says China’s one party-led, authoritarian political system will struggle to embrace the truly free trade institution that could emerge out of the trade war
It is fairy tale to suggest haters can be turned into lovers in days.
But what underscored the Trump-Juncker summit was not emotional sentiment but serious business as Washington and Brussels agreed to work to achieve an out-and-out free trade bloc, which will have “no tariffs, no barriers and no subsidies”.
If so, it was really “a big day”, as Trump put it, for world trade and for the global economy, one that will also have profound impact on geopolitics. Together, the US and the EU have the largest and wealthiest market in the world, with a population of more than 800 million accounting for more than half of world’s economic output. The US and EU also account for about US$1 trillion in transatlantic trade, also the largest bilateral relationship in the world.
All other developed economies, such as the UK, Australia and New Zealand, are likely to follow suit. The arrangement might also have attraction for some less developed major economies, such as India, Brazil, South Africa, and Asian export-oriented economies like South Korea, Singapore and Taiwan. A US-led and free economies-dominated new world trade system is on the horizon.
The World Trade Organisation will face its most serious challenge since its founding in 1995 as the organisation finds itself falling short of the expectations of many free economies.
These developments also constitute a serious challenge for China, as the world’s second-largest economy and largest merchandise exporter risks being excluded from the world’s largest open market.
What underpins the free trade bloc are the shared values, trade, interests and security concerns among the developed economies, all of which contradict both China’s interests and philosophy.
After all, the US, the EU, the UK, Canada and Japan are all major free economies under the umbrella of the G7. They are also security allies with 22 of the EU’s 28 states being members of Nato, and many are also members of other US-led core institutions.
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The biggest challenge is that China’s one party-ruled authoritarian political system will inevitably constrain its effort to fully embrace a truly free-trade institution.
Cary Huang is a senior writer at the Post