The 20th EU-China Summit just concluded in Beijing, and within a day the EU also announced a new trade agreement with Japan. As Trump continues to pursue his trade war while also bashing historic U.S. allies and trading partners, the EU is looking east instead of west.
Although the U.S. has long dominated international trade, the latest batch of agreements demonstrate that Asia is rising to quickly fill the gaps left by current U.S. policy. For Americans, this is bad news as the U.S. will increasingly be left out of agreements and could be forced to cede power in organizations such as the WTO in addition to suffering from self-imposed tariffs and the retaliation they have prompted.
In 2016 and 2017 the EU and China met but were unable to produce a jointly signed communique. This year, however, likely as the result of Trump’s trade war targeting both the EU and China, the two sides were able to come together and support multilateralism as well as the rules-based free trade system. On the global economy, the communique read, “the two sides are strongly committed to fostering an open world economy, improving trade and investment liberalisation and facilitation, resisting protectionism and unilateralism and making globalization more open, balanced, inclusive and beneficial to all.”
This is significant because China has long been (rightly) accused of unfair trade practices. For China to emerge as the defender of free trade against the United States is a reversal of longstanding positions and signals a broader shake up in economic power. This rising presence was made obvious as part of the communique also highlighted that the EU and China would establish a joint working group on WTO reform. Although it would be unlikely that China would be able to exert a great deal of influence any time soon, it is clear that the country which has long complained of and challenged WTO practices as “unfair” is positioning itself to have a larger say in the future of the organization.
Likewise, in Japan, the inking of a trade agreement that had been in the works since 2012 gained momentum under pressure from the U.S. created trade war. The deal, signed in Tokyo, is the largest in the history of either Japan or the EU and eliminates almost all tariffs. For U.S. companies, such a deal means that Japanese consumers are more likely to purchase products from European competitors than from U.S. companies and that Europeans are more likely to buy goods like cars, electronics and other goods from Japan.
Although the U.S. remains the world’s largest economy, China is a close second and rapidly catching up. The third largest economy, of course, is Japan. With the agreements reached this week, the EU gained new partnerships with the second and third largest economies in the world – without the U.S. The long-term impact of the U.S. abandonment of support for free trade and organizations likes the WTO will likely not be limited to the current damage to the American economy but also the reordering of trade partnerships and economic power that destabilizes the current position of the U.S. at the top of that order.
