Global Insight

April 2, 2014 5:20 pm

China craves invitation to join global trade club

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Beijing desperate to narrow gap with US on policy
epa04148157 Chinese President Xi Jinping (L) is welcomed by European Commission President Jose Manuel Barroso (R), prior to a meeting at the European commission in Brussels, Belgium, 31 March 2014. President Xinping is on a three day visit in Belgium. EPA/OLIVIER HOSLET / POOL©EPA

Chinese President Xi Jinping is welcomed by European Commission President Jose Manuel Barroso, prior to a meeting at the European commission in Brussels on Monday

To understand the geopolitics of trade these days just look at the contrasting visits by Barack Obama and Xi Jinping to Europe over the past fortnight.

The US and Chinese presidents both arrived in Europe pitching trade as the centrepiece of their trips. The two leaders took very different approaches, however.

Mr Obama’s relatively austere four-day visit took in the Netherlands, Brussels and Rome and included a nuclear summit. It was more about working lunches than wooing a Europe that often feels taken for granted by Washington.

In its wake some EU officials bemoaned the fact that, although both sides had agreed that trade would be at its centre, Mr Obama had only mentioned the push for an EU-US trade alliance, the Transatlantic Trade and Investment Partnership, when asked about it at a Brussels press conference.

Mr Xi, in contrast, seemed to be on an elaborate grand tour designed to charm the Europeans. Over 11 days he and his wife were feted by presidents, kings and queens, baptised tulips with champagne and picked up spades to celebrate the opening of a panda enclosure.

Everywhere he went, Mr Xi called for a “strengthening” of the trade relationship between Europe and China. In Brussels on Monday and again in Bruges on Tuesday, he pressed for an EU commitment to opening negotiations on a wide-ranging trade deal, only to receive a polite rebuff.

The contrast was telling because it illustrated how hard China is working to close the vast gap between it and the US when it comes to trade policy – and to translate economic power into a seat at the table where the new rules of global commerce are being drafted.

China last year became the world’s biggest trading nation and, with its place at the centre of global supply chains, it ought to have the most influential voice in world trade. But it does not.

Beijing staked its future on the World Trade Organisation when it joined in 2001 and it has only belatedly realised that, with the WTO’s Doha round stalled, the real action in trade is happening elsewhere. Mr Xi’s visit to Europe was part of its scramble to catch up.

Europeans and US Republicans both complain that Mr Obama does not work hard enough to sell his trade agenda and Democrats in the US Congress are doing their best to block it.

Nevertheless, the US is in the driving seat on the three big deals in world trade: the transatlantic negotiations, the talks over a 12-country Trans-Pacific Partnership and a push by two dozen economies to rewrite the rules governing the global trade in services.

All of those big three negotiations are really about two things: forging, or strengthening geopolitical and economic ties at a time of flux; or taking the lead on writing the rules for 21st century commerce. More importantly, from Beijing’s perspective, China has been left out of all of them.

There are signs of hope for Beijing. Much to the annoyance of Washington, where many remain wary of letting China in, the EU this week endorsed Beijing’s bid to join the services negotiations.

China’s desire to join those talks is at least partly driven by domestic priorities. As it seeks to rebalance its economy away from the export-led model that it has relied on in recent decades it needs to develop a more effective services sector. The 1990s accession talks to the WTO gave Beijing a way to sell tough reforms at home. So too could joining the new Trade in Services Alliance.

It is also about not being left out of a global conversation. The economies now taking part in the Tisa negotiations represent some 70 per cent of the current global trade in services. But none of the big emerging players – Brazil, China and India – is included. And that is something China is trying to change.

In an interview with the Financial Times last week ahead of Mr Xi’s visit to Brussels, Karel De Gucht, the EU’s trade commissioner, said he had detected a notable shift in China’s attitude towards trade in recent months. “The Chinese realise that they have to engage more and more in international trade,” he said. “They realise that they cannot stay outside of the club.”

Laying the groundwork to join that club is at least partly what Mr Xi was up to on his European adventure.

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