When China’s president Xi Jinping issued a call to arms on behalf of free trade earlier this year at the World Economic Forum in Davos, Switzerland, you could be forgiven for dismissing his words as diplomatic BS.
After all, the trading record of China is hardly without blemish. China has a long history of protectionism and economic bullying, to the point of demanding companies give up competitive secrets as the price of entry to its market.
An epiphany by China now isn’t very likely, either, just as U.S. President Donald Trump didn’t start the current global trade war for economic reasons. The motivation was more “governtainment”: red meat to keep his base supporters happy before the U.S. mid-term elections in November.
But, just the same, we should remember Xi’s words when he proclaimed China the champion of free trade in Davos: “We must promote trade and investment, liberalization and facilitation through opening up – and say ‘no’ to protectionism.”
There is more than a tit-for-tat trade war going on between China and the U.S.
Canada should be paying attention. Now would be a good time to put aside our ennui about whether Justin Trudeau groped someone 18 years ago and other cartoonish issues, such as the swing set at Harrington Lake, and think about Canada’s economic and geopolitical interests in a new world balance of power.
China has decided free trade is in its interests, just as the U.S. did a generation ago. To achieve economic domination, you need a rules-based system that you helped write to guarantee access to most world markets and manage your interests.
This is why the U.S. pushed for creation of the World Trade Organization in 1995. This is why the U.S. pushed so hard for the creation of the Trans-Pacific Partnership (TPP) – until Trump tore up the treaty soon after taking office.
“We can lead that process, or we can sit on the sidelines and watch prosperity pass us by,” then U.S. president Barack Obama wrote in an op-ed published in the Washington Post in May 2016. In other words, better the U.S. lead in the opening of Asian markets than China. Hence, the TPP.
The 12-country trade pact, representing about 40% of the world economy, was all about containing China’s influence and preventing Beijing from writing the rules on everything from intellectual property to labour and environmental standards. Liberalizing trade was only part of the story.
Even before Trump dumped the treaty, China clearly had similar plans for a rival treaty. As Obama wrote in his op-ed, China and 15 other nations met in Australia with a goal of reaching the Regional Comprehensive Economic Partnership.
China’s government probably couldn’t have believed its luck when Trump dumped the TPP. And that he had gone out of his way to offend and insult all of the U.S.’s allies must have been a tremendous bonus to China.
There are other signs China is looking to fill the role the U.S. had in mind. China’s Ministry of Commerce has called on “all countries to take joint action [on U.S. tariffs], resolutely put an end to this outdated and regressive behaviour, and firmly defend the common interests of mankind.”
China and the U.S.’s former allies in Europe discussed action against Trump at a special summit meeting in July. According to Bloomberg LP, former British prime minister David Cameron, former Italian prime minister Romano Prodi and other former European politicians are working for China as consultants.
A forward-thinking Canadian government – or Opposition – should be thinking about how this country can wean itself off economic dependence on the U.S., regardless of what happens to the North American Free Trade Agreement. Our leading trading partner holds a customer-controlled monopoly that governs our economy on everything from the price of oil to copyright laws.
At some point, the U.S. government will begin to think beyond Twitter’s 280-character posts and address its country’s place in the world. (Even Trump, the Internet troll-in-chief, has ordered a study on whether the U.S. should rejoin the TPP.)
But the U.S. will never regain the global influence it once had.