BRI, China, America, EU

John Major, the former conservative Prime Minister following Margaret Thatcher, made headlines last week when he offered his opinion to a debate that has reverberated through much of UK and Europe. While sympathetic to Theresa May’s growing troubles in reconciling the European Comission and her own parliament, a policy predicament he is no stranger to, he sounds the alarm on the US-UK relationship. Though, Donald Trump has time and again shown the opposite to be true, emphasizing the importance of a post Brexit bilateral trade relationship with Britain opposed to sustaining the status quo with the European Union, there is no longer an independent relationship.

Chinese trade excursions have been growing throughout Europe. Though investments flowing into Europe channeled through Chinese state-owned enterprises decreased last year, the increase from €20 billion to €36 billion represents a shift in Chinese trade paradigm, showing no sign of slowing down. China has more stake in the European market, specifically the infrastructure sector, than the EU or its now estranged ally, the US is willing to admit. The fissures dividing Europe’s political and social realities have allowed Chinese investors more room to manoeuver its aspirations inside the European market. The Visegrad countries, on the financial fringes of the EU breeding nationalism more fervently than Central and Western Europe, have welcomed Chinese investments in energy and infrastructure. The China Ocean Shipping Company (COSCO’s) buying of the Piraeus Port on Greece’s coastline is an example of China’s trade strategy for Europe. Using the port as an anchor, China plans to develop railway access from Greece through its Balkan neighbors into Central Europe. In return, the Eurosceptic governments in Hungary, Poland and Czech Republic have lent diplomatic and political support to China in regional trade and political regimes.

Quite notable is the irony that Europe seeks to inhibit Chinese aims of increased intra-European connectivity, a founding feature of the post-World War II European paradigm.f

The European Union has repeatedly voiced its concerns over growing Chinese influence across the continent. France and Germany, at the helm of European affairs after Brexit, have called for increased transparency in Europe’s trade interaction with Chinese firms. China has not made a secret of the political influence it seeks to gain from its trade ventures across the Belt and Road Initiative (BRI). Quite notable is the irony that Europe seeks to inhibit Chinese aims of increased intra-European connectivity, a founding feature of the post-World War II European paradigm. The more affluent Central European states inclusive of France and Germany have proposed stringent screening procedures for further Chinese investment in Europe, a policy that might not be met desirably by Eastern Europe. Regardless of Europe’s varied polices for China, it is poised to play an important role in balancing the burgeoning trade conflict between America and China.

Donald Trump’s relationship with China has been vicissitudinal. Despite Trump’s penchant for effective diplomacy with political strongmen, his protectionist policies have put him at odds with Xi Jinping, whose predilection for protectionism is also fairly conspicuous. The most recent set of tariffs imposed on goods from China worth $200 billion and China’s reciprocal response is indicative of the need of a buffer zone. John Major, in his tirade against Brexit proceedings warned that exiting the European Union would diminish Britain’s value in its trade relationship with America. Given Trump’s tendency for favoring bilateral deals over regional/multilateral treaties, Major’s insinuation might not prove to be very true. In fact, Trump’s diplomatic row with Europe owing to fundamental ideological differences might also not be the best way forward for American trade right given its relationship with China.

One of the most symbolic victims of the trade row between China and America is the World Trade Organization. Its legitimacy as an international mediator has been hurt in light of the two biggest economies imposing tariffs and falling back on protectionism. In fact China, which is as determined to expand its soft power as much as its physical presence across the BRI, is at the helm of the most expansive trade projects. Given East European affinity’s to Chinese developmental projects, which do not meet European transparency standards, the WTO’s governance is undermined irreparably. The EU, despite the differences emerging from within its own ranks, continues to be the most pragmatic model for free trade and uninhibited borders. The uniformity of the customs union aligns it with the agenda of the WTO, rendering it as the only developed regional trade unit that continues to adhere to the WTO in spirit. For international institutions to maintain their legitimacy and propagate counter narrative to growing nationalism and protectionism, Europe needs to establish and present its principles firmly.

Much has been made of Europe’s diminishing importance as an economic bloc in light of China’s growing global role which is why Europe needs to reestablish itself on a geopolitical scale. The need for America and China to invest in Europe has also become more important to sustain global trade networks.

Donald Trump has not made his distaste for German reliance on Russian energy imports secret. That rebuke of the European Union came days before the NATO summit earlier this year. Deriding German trade policies, before an event that has symbolized Trans-Atlantic relationship since its inception has only emboldened Europe to distance itself from the US, a policy that will further disrupt a trade network that has been a model for global trade. Economic cooperation between the EU and Russia ought to be the last of his worries because the ever increasing shift towards the far right and its political affinity to Russia is reflective of a policy shift that has put the European establishment under pressure. Political parties at the fringes of the ideological spectrum have converged over a Eurosceptic, anti-immigration and Russia favoring agenda that is in conflict with the EU’s core values. Governing parties in the Visegrad group of countries and opposition parties in Western Europe, growing in popularity every coming election, threaten to undermine the European agenda. It will not be in America’s interests to play second fiddle to Russia in its trade and political relationship with the European Union, while it has embarked on a trade battle with China.

Deriding German trade policies, before an event that has symbolized Trans-Atlantic relationship since its inception has only emboldened Europe to distance itself from the US, a policy that will further disrupt a trade network that has been a model for global trade.

Europe has an important role to play in the international political economy while both the US and China continue to actively invest in the continent. Brexit has led both the EU and Britain seeking trade opportunities across the Middle East into Asia. It is as important a time as any for the EU to maintain its alignment with the WTO, becoming an institutionalist model at a time when national preferences threaten to derail international trade and commerce.

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