Macroscope | US-China trade spats cloud prospects for progress

This column has argued on several occasions that multilateral negotiations on trade, climate change and other global issues can only succeed when China and the United States are on the same side. At the very least their differences must be sufficiently similar to permit mutually compatible outcomes.

The need for US-China alignment is dictated by the sheer economic size of the two parties relative to the rest of the world.

But preferential deals are in a different class. Initiatives such as the recently concluded but yet to be ratified 12-nation Trans-Pacific Partnership (TPP) – which excludes China – are shaped partly by geopolitical rivalry. The same can be said of the Asia-based Regional Comprehensive Economic Partnership and the EU-US Trans-Atlantic Trade and Investment Partnership.

The contrast between rivalrous preferentialism and multilateral cooperation favours the latter. The World Trade Organisation’s (WTO) inclusiveness trumps the parochialism of exclusion, especially when its motivation is geopolitical.

Cooperation between the two giants in the room was in evidence at last month’s WTO ministerial conference in Nairobi. It facilitated the adoption of a formulation that could break the stalemate that has frustrated progress in the WTO’s Doha negotiations since their launch in 2001.

If China and the US make common cause, a necessary but insufficient condition exists for success. Others have to agree too, although the costs of blocking a consensus are inversely related to country size.