The European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) should build a lasting cooperation platform, which could be named the Free and Fair Trade Club, in order to achieve various geostrategic aims, researchers at the German Economic Institute in Cologne say.
In addition to free and fair trade, its guiding principles should include voluntary cooperation, variable geometry and open plurilateralism, a report says (opens pdf).
Pooling the economic weight of Free and Fair Trade Club members’ markets would create a power base that these middle powers could leverage in relations with the great powers, the United States and China, in the medium to longer term.
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The US and China are undermining the rules-based international order by using power politics and by employing coercive measures. The US uses blunt tariff and security threats, and thus projects the power of its market size and military might in order to force one-sided and unbalanced trade and investment concessions from partners with an aggressive focus on “America First” objectives.
China also uses coercive measures by exploiting its near monopoly in the production of important and often critical raw materials to the serious detriment of affected partners. Moreover, China’s state capitalism undermines the world trading order by using loopholes in the multilateral trade rules framework. Massive economic distortions – that emanate from outsized direct and indirect subsidies in the Chinese economy and from a large undervaluation of its currency – contribute to the record merchandise trade surplus of China. This beggar-thy-neighbour policy comes at the costs of its trading partners and hollows out their industrial bases.
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Furthermore, the US and China defy international law: the US does so in Venezuela and Iran, and China does so by acting aggressively in the South China Sea and by threatening Taiwan. Both countries propagate a world in which might makes right.
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The CPTPP is a plurilateral trade agreement with 12 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United Kingdom and Vietnam. CPTPP members represent about 13% of world GDP and about 15% of global trade.
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On top of this, several additional countries are currently interested in joining the CPTPP. However, China’s accession plea does not appear very promising as Beijing used coercive trade measures in recent political conflicts with Australia and Japan, two important CPTPP members. From the perspective of the EU, several free trade agreements (FTAs) have already been concluded with most CPTPP members except Brunei, while negotiations are ongoing with Malaysia.
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