U.S. Withdrawal from TPP Strengthens China’s Negotiating Position in the Region

The protectionist turn in the United States presents huge challenges for the two export nations Germany and China. But at the same time, it provides new opportunities for cooperation. For both partners, opening markets will become more important. The withdrawal of the United States from the Trans-Pacific Partnership strengthens China’s negotiating position in the region.

Hard Times Ahead for Internationally Oriented Economies

In a report published by the World Economic Forum (WEF) in January, Brexit and the Presidency of Donald Trump were identified as posing the biggest risks for the global economy. Even if it is not yet clear to what extent the new course adopted by the U.S. President will impact on the global economy, one thing appears certain: hard times lie ahead for globalists. Internationally oriented economies like China and Germany, whose industries are deeply integrated into international value chains, will be particularly hard hit.

Openness and Free Trade to Become More Important for German-Chinese Relations

In the future, it will be even more important that the two countries are reliable trade partners for each other. China could make a decisive contribution to such a partnership by resolutely dismantling barriers to trade and investment. Germany’s best argument vis-à-vis China is the openness of its own markets; thus it is essential that Germany sticks to the principle of open and rules-based trade and investment. In this context, the EU-China bilateral investment treaty, for which negotiations began in 2013, is becoming ever more urgent for both partners. The agreement is intended not only to protect investments but also to improve access the Chinese market. Hopefully, President Xi’s clear statements at the WEF in Davos in January on free trade and open markets are followed up with deeds and China does, in fact, become more open.

The withdrawal of the United States from the Trans-Pacific Partnership (TPP) creates new opportunities for China to more rapidly pursue its own regional free trade initiatives, such as the Regional Comprehensive Economic Partnership (RCEP). To ensure that trade in Asia develops in line with European interests and values, the EU should firmly push ahead on bilateral free trade agreements with Asian partner countries. For example, negotiations with Japan could be concluded this year. Moreover, the EU is currently also negotiating with the Philippines, Indonesia, and India, while negotiations are already planned with Australia and New Zealand. We should grasp all these opportunities to achieve more openness.