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Global Governance
Opportunity Knocks
China is placed to lead the rebalancig act which the governance of world trade clearly needs
By Tim Collard | NO. 50 DECEMBER 15, 2016

U.S. President-elect Donald Trump's decision to pull out of the proposed Trans-Pacific Partnership (TPP) trade agreement was not entirely unheralded, but it turned a campaign promise very rapidly into a firm commitment. The TPP, agreed in outline last year following lengthy negotiations for an overarching regional deal, ran into opposition within the United States before Trump's election. Even Trump's opponent Hillary Clinton, formerly a supporter of the TPP, turned her back on it during the presidential campaign.

U.S. non-participation does not entirely kill the deal—Singapore stated as recently as November 20 that it still planned to sign the agreement—but it postpones any prospect of a comprehensive regional agreement for the time being. And certainly there is no further prospect of a new trade regime being established without China's participation.

The removal of the TPP from the negotiating table cannot but focus some attention on a proposal which remains on the table: the Chinese-backed Regional Comprehensive Economic Partnership (RCEP), which has the ASEAN nations at its core and includes Australia and India but—mirroring the TPP's exclusion of China—excludes the United States.

The RCEP may indeed function as a nucleus for a wider association, a milestone on the road to a truly comprehensive Asia-Pacific free trade area. The important point, however, is that the United States has now abdicated any claim to lead the shaping of such a deal, and China's recent active regional economic diplomacy makes it clear where the only possible source of leadership on this issue lies.

It is doubtful whether China could ever have engaged with the sort of trade regime the United States has been pursuing over the last few years. The TPP, and its parallel organization in the Atlantic region, the Transatlantic Trade and Investment Partnership (TTIP), contain some elements which are extremely controversial in many countries.

One of these is a proposal for a dispute resolution mechanism, called "Investor-State Dispute Settlement," which amounts to a newly instituted court for settling differences between corporations and sovereign states. This would give corporations a platform to sue sovereign states for adopting policies which damage the "anticipated profits" of foreign corporations.

I cannot imagine that such derogation from the sovereign rights of state governments could ever be acceptable to China. And, although China was at no point a party to the TPP negotiations, it is unlikely that the country would be happy to see such arrangements prevailing in its own region or in the world at large.

The new U.S. president has no wish to withdraw completely from the shaping of trade arrangements in the Asia-Pacific region. It is, however, likely that Trump realizes that his own election was partly due to a backlash against the "establishment's" overreach in the field of international trading regulations, among other areas. In this, Trump's election can be compared with the reaction against overreach and complacency which gave rise to the British people's decision to leave the European Union. And, it is not inconceivable that other countries will follow Britain's example, leaving the EU with a choice between the radical reform it has always shied away from and dissolution. Both the TPP and the TTIP seem to be examples of large corporations and their international networks aiming at supranational power, undermining the capacity of sovereign governments to act in the interests of their own peoples.

This is not a question of China trying to enforce its own approach to international trade on the rest of the world. It is just that the West appears to have lost its way, precisely at a time when China is ready to accept a larger role in the management and development of the global trading infrastructure. Furthermore, in recent years it has been China that has drawn attention to the lack of a sustainable balance between the requirements of businesses to operate internationally with a minimal amount of obstacles, and the rights and obligations of governments to ensure the welfare of their peoples.

It could be that China is placed to lead the rebalancing act which the governance of world trade clearly needs. Perhaps Trump deserves thanks for taking a speedy decision, rather than allowing a futile negotiation to drag on. In any case, the world awaits China's response.

The author is a columnist with, where this article was originally published, and a former British diplomat

Copyedited by Chris Surtees

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