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The global fashion business journal

Nov 14, 201912:23am

Step back in globalization? World powers search for new allies

The trade war between China and the United States is accelerating the search for bilateral agreements to avoid it. This year, two big treaties have entered into force, the Trans-Pacific Partnership and the EU-Japan Economic Partnership Agreement.

Mar 25, 2019 — 10:01am
S. Riera
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Step back in globalization? World powers search for new allies

 

 

The new cold war is about trade. The competition between China and United States over international trade is increasing the interest in the search of allies through free trade agreements. In 2019, two new macro-treaties have entered into force, the Trans-Pacific Partnership and the EU-Japan Economic Partnership Agreement, but there are around fifteen under negotiations, some of them in a standstill for some years.

 

The World Trade Organization (WTO) has already given an account of the halt of international trade. In its latest forecasts, the international organism lowered its growth forecast to 3.7% for 2019, compared to the 3.8% initially expected, due to an intensification of trade tensions and tighter credit conditions in the different markets.

 

In 2019, two agreements that gather some of the most powerful economies in the world and that exclude the United States and China have been activated. The first one is the Trans-Pacific (TPP), which includes eleven countries from America and Asia, and disassociated from the United States when Donald Trump became president.

 

The TTP covers a market of 500 million people and the economies that make part of it represent close to 13% of the world’s Gross Domestic Product (GDP). At the beginning of the year, the Economic Partnership Agreement (EPA) between the European Union and Japan, creating a trading area of more than 600 million people and a third of the world‘s GDP.

 

 

 

 

The open fronts of Brussels

The Executives of Brussels and Washington have established contact to resume the negotiation of a free trade agreement. The move comes two years after the negotiations with Barak Obama’s administration were stopped with the arrival of Trump to the presidency of the United States.

 

This contact is only to regulate the framework of the negotiation and the European Parliament has already spoken out against these talks as they have been raised. Although this vote is not binding, it represents a political setback for the European Commission when it comes to defending a possible agreement.

 

The European Union and China announced in 2013 the start of negotiations to establish commercial relations, but their progress is very slow. In the last bilateral meeting held last summer there was an exchange of new offers in the negotiations and the joint will to defend multilateralism and the construction of a multipolar world.

 

The negotiations between Brussels and New Delhi for a treaty between the European Union and India do not progress either. The last meeting between the president of the European Commission and his counterpart in the Asian country was at the end of 2017. The talks have been going on for twelve years now.

 

 

 

 

The European Union also initiated negotiations in the last decade with other Asian countries, such as Malaysia, Vietnam and Thailand. However, only one of them has closed an agreement with Vietnam, while Malaysia and Thailand did not reach a deal.

 

With Latin America, Brussels has been considering for two decades to sign an agreement with the Mercosur trade bloc, which was sealed in 2000 by Argentina, Brazil, Paraguay and Uruguay. Last summer, both parties came very close to sealing an agreement, although at the end it was not successful and the negotiation cooled.

 

Another historical pact that has gone through different ups and downs in its negotiations has been the one maintained by the European Union and the Gulf Cooperation Council (GCC). The talks began in 1990 and the last meeting was in 2017.

 

Trump agrees to negotiate

After sealing the T-MEC (the update of the old NAFTA) last year, the Trump Administration has begun to draw up commercial lines with other countries. In addition to resuming the contact with Brussels, Washington has also raised possible negotiations with the United Kingdom and Japan.

 

 

 

 

Last July, the British Prime Minister, Theresa May, and her US counterpart agreed to negotiate a post-Brexit free trade agreement; two months later, Trump and Shinzo Abe, the Japanese Prime Minister, formalized the negotiations. However, since these movements were announced, no bilateral meeting has been held between the parties.

 

 

United Kingdom after the ‘Brexit’

In addition to advancing negotiations with the United States, the British diplomacy also begins to seal alliances with other giants of foreign trade to strengthen its position after leaving the European framework. Thus, together with the United States, other fronts that the Government of May has opened are China, Central America and Peru.

 

Talks with the Chinese Executive began last summer, although any announcement of negotiations has been disclosed. In case of Central America, the talks would be more advanced. Last February, the ministers of Economy of the region met to seek consensus to negotiate a free trade agreement together with the United Kingdom.

 

With Peru, on the other hand, negotiations have already been engaged between the Administrations of both countries to reach an agreement. In fact, one of the last bilateral meetings was a month ago. Peru is currently one of the most active countries in the search for free trade agreements. The Government of Lima also finalizes pacts with Australia, China and Argentina.

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