China and EAEU Move Closer to Free Trade as the US Retreats Into Self-Defeating Protectionism

_ Adam Garrie, director, Eurasia Future. 5 June 2018.

On the 17th of May, China and the Eurasian Economic Union (EAEU) signed an agreement to expand trading relations with an aim to create a large and diverse free trading arrangement beginning in 2019. The EAEU is a single market consisting of Russia, Armenia, Kazakhstan, Kyrgyzstan and Belarus, while the bloc currently has free trade agreements with Vietnam, Egypt and Uzbekistan. Iran has signed a preliminary agreement to begin a provisional free trading relationship with the EAEU while Serbia intends to commence a similar agreement. Indonesian and Thai representatives have also expressed an interest in a free trading relationship with the EAEU.

With China looking to commence free trading with the EAEU in 2019, Beijing and Moscow have shown a firm commitment to integrating the existing free trading mechanisms of the EAEU with the One Belt–One Road logistics and global commerce superhighway. This further represents the long-term commitment of both President Xi Jinping and President Vladimir Putin to break down all remaining barriers to the free flow of goods and even services between China and the Russian led Eurasian trading bloc.

As the EAEU expands its free trading relations in all directions, there is a very real possibility that the EAEU could become the world’s most dynamic single market and customs union in the near future. After implementing the trading agreements with China, the next big move for the EAEU would be to work on an ASEAN-EAEU free trading agreement, something which could easily dovetail onto the existing China-ASAEN free trade agreement. .

The recent agreement between the EAEU and Beijing represents a great stride for the still very young EAEU, but as previous agreements have demonstrated, removing legal barriers to trade is only the first step in turning the EAEU into a healthy, dynamic and game changing trading partnership. The EAEU’s de-facto leader Russia must work hard to encourage new forms of trade both within the EAEU and with the EAEU’s partners in free trade. China’s One Belt–One Road is the perfect way to help launch a new era in the EAEU’s relations with its multilateral partnerships as the opportunity for China to provide infrastructural development to EAEU partners combined with Moscow’s initiatives to break-down trading barriers, including with former geopolitical rivals, holds substantial potential.

Even in the short term, the recent China-EAEU agreement demonstrates that far from the 21st century being a new era of protectionism, today’s world is in fact a golden period of free trade in which the US is alone in seeking to revert to the early 20th century model of high tariffs against both rivals and traditional allies. While the late 20th century was dominated by a US model of free trade, in the 21st century, it is China’s multipolar/anti-hegemonic model of free trade that is winning support throughout the world at a time when the US is busily engaged in a self-defeating retreat into protectionism.

hina’s preferred model of free trade has already won a favoured position in developing countries vis-a-vis the US model. The US model of free trade prioritises an opening up of markets without any precondition for investment in poorer trading partners, while Washington also has a habit of attaching multiple political strings to such agreements which tend to have a stifling effect on national sovereignty in developing nations. By contrast, the Chinese model of free trade tends to associate a mutual opening up of markets with generous investment from China in the form of cash injections, the building of infrastructure, long term development funds and fair credit lines. Most crucially, China’s One Belt–One Road looks to create a more even footing among free trading nations by giving developing nations the same logistical assets that have traditionally only been available to advanced wealthy economies.

While China prioritises peace through prosperity, the US models of free trade which reached their zenith in the Obama years tended to enforce an attitude of hegemony through subservience to the dominant power, all the while depriving both developing nations and the domestic US economy of much needed investment. Thus, the failed Obama model sought to deprive developing nations of sovereignty all the while harming the US worker as 1990s American political icon Ross Perot warned as early as 1992.

Now though, the Chinese model which is laissez faire in terms of political requirements of a potential partner and pro-worker in the sense that China’s investment model seeks to balance productivity and industrial output among all trading partners, is becoming increasingly attractive both to developing nations and wealthy nations with a long history of trading with the US. In this sense, while free trade might appear to be a universally understood concept, the US definition of free trade is incredibly different than the Chinese definition of free trade. Taken as a whole, the Chinese conception of free trade is far freer and also far fairer than the US model which Donald Trump is rapidly replacing with unilateral protectionist machinations.

Now is the time for Russia to use the potential of the EAEU and become more proactive than ever in promoting new free trading opportunities with China’s partners all along One Belt–One Road. The result could be the flourishing of the largest multipolar free trading global zones in history and a big win-win for all those involved.


Leave a Reply

Your email address will not be published. Required fields are marked *