Europe’s only way forward with China is backwards

In order for Europe to negotiate any substantial concessions from China, it must remove China’s current access to European markets and put up new barriers to China’s participating in the European market. Otherwise, China has no incentive to concede.

Europe has been negotiating a trade and investment agreement with China for seven years and has made little progress. Why is this. It’s simple – China already has near full access to European markets. China is incentivized to delay, talk, assuage fears, but do nothing. And that’s what it will do unless and only unless, Europe…goes backwards.

While Trump’s domestic policies will likely lead the US to the same fate he himself has lived in for decades (bankruptcy/anger/unhappiness), his (or Steve Bannon’s really) approach to China is actually correct. When it comes to making concessions, China only responds to one thing, the stick. The biggest, spikiest stick is one that threatens to the CCP’s grip on its power at home – domestic unemployment. The foundation of the CCP’s power over the past 40 years has been providing increased salaries and job opportunities for its people. China has had free and nonreciprocal access to the US and Europe for 40 years under the guise of “we’re a developing nation, so the field should not be level.” Things have changed since 1980.

One might think increased opportunity for China’s companies in Europe would be a high priority for the CCP. That thinking is wrong. Recycling of money domestically is China’s best method for continuing to have outsized GDP. More access to Europe would be great, but it’s a nice to have. Domestic company makes product, domestic consumer buys product, domestic government takes in more tax, domestic job creation is maximized. This recycling of “domestic product” :)…is more critical to the CCP’s continued grip.

The export economy is still important to China, but long term, the CCP knows it needs to grow off of domestic consumption. The longer Europe negotiates, the less important the export markets become for China. Hence the delay, hem, haw, strategy.

The only move that Europe can make is backwards – which will hurt it’s larger companies in the short term. Simply not moving forward with a broader EU-wide trade agreement will feel empowering, but not help it achieve its goals of getting more access in China.

As Joel Brenner said (http://cis.mit.edu/people/joel-brenner), Obama and Bush were driving under the influence (of big business) on China. The EU has as well.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s