China picks up the baton dropped by United States
China has wasted no time in seizing the opportunity presented to it by the United States’ withdrawal from world trade leadership. Seldom has New Zealand seen a diplomatic mission deliver a more impressive tray of gifts than those brought by China’s Premier Li Keqiang on his state visit this week.
Talks on upgrading our Free Trade Agreement will begin in four weeks. Chilled meat has been granted access on a six-month trial to a market we have been permitted to supply only with lower value frozen product. A multimillion-dollar biotech joint venture will allow cancer therapies under trial in China to be developed under a western regulatory environment here. Tourism from China will be further boosted with additional flights, new visa rules and easier movement through New Zealand airports. There is even talk of investment in New Zealand infrastructure.
None of these are really gifts, except perhaps the last. The rest will benefit both countries as trade normally does. Leadership of world trade liberalisation requires convincing governments the mutual benefit is worth the political cost of reducing domestic protections over the objections of wellentrenched industrial lobbies. It is easier to convince small countries, that can see the attractions of access to much larger markets, than it is to persuade the government of those markets.
Nobody in the Trans-Pacific Partnership negotiations had any illusions the Obama Administration joined that effort primarily for a geopolitical purpose since it excluded China. Sadly that fact was unknown to Donald Trump when he told his presidential campaign rallies the TPP was too generous to China (but facts would probably not have changed his mind).
Nobody dealing with China will have any illusions that its interest in trade agreements is primarily geopolitical too. The inward focus of “America First”, not just in economic policy but in alliance commitments and military bases, opens the possibility for China to become the dominant power in the Asia-Pacific hemisphere. It knows its reception in the smaller economies of the region could be greatly enhanced if it picks up the baton dropped by the US and lends its weight to a comprehensive set of fair rules governing international commerce and investment.
That might not be the TPP, even if the remaining 11 signatory nations confirm the agreement. China, in association with Asean, is already negotiating a Regional Comprehensive Economic Partnership that would be open for others to join. Bill English hedged his view of the RCEP after his talks with Premier Li, saying it would be “a bit of a challenge” to get a deal of the quality New Zealand wanted.
But the TPP has set the benchmark for what can reasonably be expected and all future trade agreements will be measured against it.
China’s leaders have been expressing the right sentiments about trade liberalisation since the US election. The Premier’s offerings on this visit are clearly intended to show they are serious. Global economic progress is not dead yet.