Toward a Euro-Pacific Partnership
Notwithstanding the latest truce between the United States and China, the world has entered a dangerous new phase of great-power competition. Under such conditions, smaller powers such as European and Pacific-Rim countries will stand no chance of enjoying fair and open trade unless they form a united front.
PARIS – Thanks to the efforts of Japanese Prime Minister Shinzo Abe, the recent G20 summit in Osaka avoided the worst possible outcomes. That counts as a victory in the age of US President Donald Trump. Among other things, G20 leaders issued a final communiqué affirming the importance of free and open trade. And on the sidelines of the summit, the United States and China agreed on a trade-war armistice, while the European Union announced the signing of new free-trade agreements with Vietnam and the Mercosur bloc (Argentina, Brazil, Paraguay, and Uruguay).
Nonetheless, the underlying sources of global economic uncertainty remain. Until the Sino-American conflict is resolved, commercial and trade flows will be at risk of political disruption. In order to avoid becoming collateral damage in the new great-power struggle, Japan, the EU, Canada, Australia, Malaysia, and many others are coming together to protect their interests and the international trade system. Each has acknowledged that the most important issues in global trade are regulatory, concerning not tariffs but investment protections, subsidies to state-owned enterprises (SOEs), intellectual-property (IP) and environmental protection, open public tendering, e-commerce, and data flows.
A recent study finds that countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Canada Comprehensive Economic and Trade Agreement (CETA) have already converged on most of the major regulatory issues. But as countries that largely rely on active diplomacy and soft power, they have everything to lose from a prolonged and escalating geopolitical conflict in which they would come under pressure to choose sides. To defend their interests, they must ensure that global trade is subject to objective dispute-settlement mechanisms.