A bloc of key American allies joined a major new trade deal with China, even as Beijing seeks to convert economic clout into political influence at the expense of the United States.
“Europe and the U.S. should see this as a wake-up call to join forces,” German politician Manfred Weber, who leads the European People’s Party in the European Parliament, said this week.
The 15-nation Regional Comprehensive Economic Partnership signed this week was celebrated in Australia as “the biggest trade deal since the [World Trade Organization] was created.” But China often uses economic connections as tools to punish countries in political disputes, making the pact a reminder that a rising communist regime is seeking to consolidate its economic and political position despite Western unease.
“In the big picture, it’s obviously bad for the U.S.,” the American Enterprise Institute’s Zack Cooper said. “Any time you’re less critical to the regional trade and investment game, then it’s going to decrease your influence. And clearly, the fact that there is now an Asian trade agreement that leaves out the United States is a bad thing.”
China’s expectations for the agreement are suggested by state-run media outlets, which have rebuked Australian Prime Minister Scott Morrison for signing a security agreement with Japan and failing to acquiesce to Beijing’s demands in other disputes in the days following the signing of the trade deal.
“This was an opportunity for Australia to begin the process of resetting the trade relationship with China,” an opinion piece published by China’s state-owned CGTN warned Friday. “History will look back at this as the period when Australia’s economic prosperity was destroyed by its own government.”
Australian business officials are alarmed by a warning from the Chinese Embassy in Canberra, where a diplomat notified them that “China is angry” and aired a list of grievances with the Australian government. Chinese officials have also blocked the importing of various Australian goods over the last year, due in part to Morrison’s demand for an investigation into China’s and the World Health Organization’s mishandling of the emerging coronavirus pandemic.
“I’m not prepared to agree to a meeting on the condition that Australia compromise and trade away any of those things that were frankly listed in that, in that unofficial list of grievances,” Morrison told business officials this week.
These controversies exemplify the downsides of closer economic integration with China, but American analysts take consolation in their expectations that RCEP, despite its size, will have only a modest impact on economic relations between the countries involved.
“It’s important to remember that for the countries that are in RCEP, China was already their largest trading partner before the agreement was signed,” said Jack Caporal, an international business analyst for the Center for Strategic and International Studies. “In that respect, in terms of the economic big picture, the agreement probably doesn’t change that much in the short term.”
Cooper concurred, adding that President Trump’s refusal to join the Trans-Pacific Partnership — a free trade deal with 11 other Pacific Rim countries that involves much higher standards than any pact China is willing to adopt — has left regional allies with limited economic options.
“For most countries in Asia, they don’t feel like they have a choice between trading with China and not trading with China,” he said. “There are a lot of Australians that are nervous about the way that China has used its economic leverage for political purposes, but at the same time … you can’t beat something with nothing.”
China has attempted to use economic incentives and pressure to discourage the U.S. and other democratic nations, especially in Europe, from establishing a united front against Beijing. Politicians in Germany, the economic heavyweight in the European Union, have placed a premium on economic ties with China, but they may be wearing thin.
“China is absolutely an enemy to the EU’s ideas about the European way of life, to how we define what our society should look like,” Weber told the South China Morning Post.
Yet the politics of trade policy — both Trump and 2016 Democratic presidential nominee Hillary Clinton denounced the Trans-Pacific Partnership during the 2016 election, even as former President Barack Obama’s administration finalized the terms — could make it tricky for President-elect Joe Biden to turn that opportunity into an achievement.
“Congress is actually the hard sell,” Cooper said, adding that Biden might have to spend “some political capital” to unite congressional Democrats behind such agreements. “We need to reenter the fray.”
