The centre of gravity of global trade shifted towards the Asia-Pacific in the first two decades of this century. In fact, it could be claimed that consumer demand out of China helped drag a number of economies through the Global Financial Crisis.
More recently, however, trade tensions have risen. The threat to global economic wellbeing is real.
The geopolitical landscape started to change when the new Trump Administration withdrew from the Transpacific Partnership (TPP) during the final stages of its negotiation. Paradoxically, the whole idea of such a trade grouping was originally a United States idea, first formulated during the Clinton years.
The Trump exit from TPP was part of a wider withdrawal of US leadership from the rules-based global trading system. Intransigence on judicial appointments at the World Trade Organisation (WTO) also started to destabilise that critically important disputes resolution process.
At the same time, President Trump entered into a tit-for-tat trade war with China. Unsurprisingly, China also seemed to attach less importance to WTO rules and we saw partial product bans and tariffs being imposed on imports in what appeared to be retaliation for political criticism.
For example, when Australia called for a more rigorous inquiry into the origins of Covid-19, hefty tariffs were slapped on products not essential to the Chinese economy, such as barley and wine.
Until now, China has had a pretty good track record of compliance with WTO rulings. As the first trade minister in the world to sign China up to the WTO, I hope that will continue.
But political tensions induced by a diversity of issues from the South China Sea, to the treatment of Uyghur Muslims and Hong Kong protesters; the place of Taiwan in the One China future, not to mention alleged malicious cyber activities by the Chinese Ministry of State Security, all require careful, clear diplomatic handling if they are not to further destabilise trade.
For Australasia, much is at stake. China takes at least 40% of Australia’s exports and about 30% of New Zealand’s.
There were intensified efforts to conclude negotiations on the Regional Comprehensive Economic Partnership (RCEP), involving Australia, New Zealand, the ten members of Association of Southeast Asian Nations; as well as China, India, South Korea, and Japan. Sadly, at the last minute India withdrew. That was a significant blow as RCEP was seen as a pathway for bringing India more widely into the global trading system.
The net result of all these manoeuvrings isn’t great. What’s more, the Biden Administration seems in no haste to re-engage with the multilateral trading system.
All is not lost, however. The TPP was finally concluded as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with world-leading work on good regulatory practice and a valuable chapter introducing, for the first time in an FTA, sensible remedies for dealing with members failing to implement their own environmental regulation.
Moreover, we saw Japan emerge as a leader in ongoing trade liberalisation work. The question now is – can Global Britain also step up to a leadership role in helping navigate this changed geopolitical landscape?
First, acceding to CPTPP would have an impact way beyond the narrow economic cost-benefit analysis. It would engage the UK with one of the most rapidly growing parts of the world. But more importantly, it would help bring the dynamism of the Asia-Pacific to the doorstep of Europe. As New Zealand has seen with all our trade agreements, the potential to open minds is enormous.
The UK’s membership of CPTPP may also encourage the US to rethink its position. A transatlantic UK-US free trade agreement seems fraught. Achieving it via CPTPP offers wider benefits to both sides.
The role for Global Britain, though, doesn’t stop there. All are aware that the full potential of the Asia-Pacific region won’t be realised without India. Hence the current thinking around the Indo-Pacific.
Many countries have tried to negotiate free trade agreements with India. Most have struggled and developed countries have failed to achieve anything like a comprehensive FTA.
Britain’s relationship with India goes back a long way and is deeper rooted than most. The chance for Britain to ease open the door to free trade with India is real. If anyone can do it, Britain can.
The United Kingdom has the heft. Prime Minister Boris Johnson’s Global Britain captures the vision. The first steps are underway – agreement in principle on what looks like a quality FTA with Australia, negotiations close to completion with New Zealand, and accession to CPTPP started.
Dialogue partner status by ASEAN has also recently been granted. It’s a welcome sign from the Asia-Pacific. If Global Britain could help lead a new chapter of economic cooperation in the Asia-Pacific, the benefits would be enormous.
The Rt Hon Sir Lockwood Smith is the former High Commissioner of New Zealand to the United Kingdom. This article first appeared in our Centre Write magazine Target secured?. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image:Number 10]
