The WTO is the world’s primary trading system, comprised of 164 member-economies scattered across all of the world’s five continents, and it is obviously in the interests of the world that it works effectively. But growing disputes between China and the Western economies are making the World Trade Organization increasingly dysfunctional. Could the result be a radical overhaul of the global trading system?
Europe is not used to getting its way in trade negotiations with China. But that is exactly what appeared to happen at the EU-China Summit recently. In the days leading up to the meeting in Brussels, it looked like the two sides would fail to agree a joint statement for a third straight year. European Union ambassadors complained of the “slow and difficult” talks with their Chinese counterparts. Just four days ahead of the summit, one diplomat told Euractiv that Brussels and Beijing remained “worlds apart” on several key issues. But all that changed when the Chinese side made a last-minute push to secure a deal.
The rapid deterioration in relations between China and the US over the past 12 months has left many scratching their heads and wondering how we got here. Stephen S. Roach is not one of those people. A former Chief Economist of Morgan Stanley and currently Senior Fellow at Yale University’s Jackson Institute for Global Affairs, Roach has been watching the development of Chinese-US relations closely for more than three decades. For him, a tariff war between the world’s two largest economies was as predictable as it is harmful.
The Sino-US trade tussle has had the greatest impact on multinational corporations in China—precisely the group that the US started out trying to support. Many have begun considering radical courses of action to stay in business.
For many in Beijing, the trade war confirms long-held suspicions that the United States is determined to thwart China’s rise as the world’s next superpower. As a result, US demands that China abandon Made in China 2025 have also tended to be viewed by Beijing as being motivated not by concerns over fair competition, but by a desire to make sure America keeps its lead in the global innovation race. Public statements from senior figures in the Trump administration have fueled these concerns—the trade war not as an isolated incident, but part of a longer history of US attempts to undermine rival powers.
Few thinkers can speak about global governance with as much authority as Kishore Mahbubani. A former President of the United Nations Security Council, Permanent Secretary of Singapore’s Foreign Ministry and Dean of the renowned Lee Kuan Yew School of Public Policy at the National University of Singapore, he has been named “the muse of the Asian century”. In his latest book, due next year, Mahbubani plans to tackle the rising tensions between the US and China. As he explains, the US should embrace a more minimalist and strategic approach to foreign policy to maximize its interests in an era of Asian dominance.
China’s huge current account surplus was once the symbol of its status as the “factory of the world.” But in recent years, that surplus has been shrinking. Last year, it sank to 1.3% of GDP. The half-year deficit announced in August was the first in more than 20 years. Some economists predict China could soon be running a current account deficit. If that happens, it will be a watershed moment with implications for all manner of issues, from the policies Beijing is able to pursue to the status of the RMB as a global currency and maybe even the way the US finances its debt.
The speed at which China has emerged as a major player in Southeast Asia is stunning. In 2000, total trade in goods between China and the 10 members of the Association of Southeast Asian Nations (ASEAN) was only $40 billion. By 2014, this had leaped to $480 billion, and is forecast to reach $1 trillion by 2020. Southeast Asia has become a strategic market for companies across the whole Chinese economy. Manufacturers are looking to offshore production in order to reduce labor costs, while tech companies are eyeing the region’s 633 million-strong consumer market as a new source of growth.
“Trade wars are easy to win,” says US President Donald Trump. US-UK trade historian Marc-William Palen disagrees. In this interview, Palen, author of The “Conspiracy” of Free Trade: The Anglo-American Struggle over Empire and Economic Globalisation, 1846-1896, and senior lecturer in history at the University of Exeter (UK), argues that US politicians’ pursuit of trade wars in the 19th and 20th centuries yielded mostly short-term political gains for themselves and high, long-term economic and strategic costs to their country.
China played a surprisingly prominent role in debates surrounding the UK’s 2016 referendum on leaving the EU. For leading “Leavers”, Brexit was a chance for Britain to free itself from a stifling Brussels bureaucracy and build stronger trade relations with upcoming powers like China. But those expecting a blossoming in China-UK relations after Brexit might be disappointed, says Leslie Young, Professor of Economics at CKGSB. Professor Young, who received a doctorate in mathematics from Oxford University in 1971, at the age of 20, and who is now a recognized authority in international economics, explains how Chinese business is likely to be affected by Brexit.