China – the World's Trade Locomotive

Any country tying itself into a trade bloc with the United States, to the disadvantage of relations with China, is therefore entering a grouping the center of which is a relatively stagnant area of world trade. Despite U.S. political pressure to join, there are definite limits to how much other economies are willing to enter blocs with relatively stagnant trading partners, such as the United States, at the expense of more dynamic ones such as China.

These international trade realities interrelate with domestic political considerations. As global tariffs on manufactured goods are in general already low, the necessary aim of the United States is to negotiate advantages in economic areas where it is particularly strong but where international tariffs and other barriers are still significant. Two of the most important of such sectors are agriculture and services. But these are areas of particular sensitivity in numerous countries. For example, in Japan rural areas are the key electoral base of the Liberal Democratic Party (LDP), and this is a key reason why protectionism has been maintained in Japan’s agricultural trade policy. Japan’s newly signed trade agreement with Australia therefore did not dismantle agricultural trade barriers to the extent the United States wants.

In the United States itself there is significant resistance, particularly from the Democratic Party, to trade concessions in manufacturing and other sectors where developing economies hold competitive advantages. It is therefore difficult for the United States to offer proposals making it worthwhile for other countries to accept the domestic political problems that would be created by further opening their economies to the United States in agriculture and services.

Given actual world trade dynamics, China’s proposals for widespread trade liberalisation, such as the RCEP, will be more beneficial for other countries’ economies than current U.S. protectionist proposals for the TPP.