"Geostrategic Aspects of Trade": China, TTIP, and Ukraine

As part of the Future of Diplomacy Project's annual "Europe Week," Former EU Trade Commissioner and the program's 2015 spring Fisher Family Fellow, Karel De Gucht, addressed Harvard Kennedy School students in a public seminar entitled "Geostrategic Aspects of Trade" on March 4. Speaking with students and faculty, Mr. De Gucht examined the conflict between rival Chinese and American economic plans for the Asia-Pacific region, the ongoing difficulties behind TTIP negotiations, and the trade-related dimensions of the current Ukraine crisis.

China's "One Belt, One Road"

De Gucht began his speech by analyzing China's recent economic strategy to establish a series of economic roads, including the new Silk Road, the Maritime Silk Route, and the Island Silk Road. The former Trade Comissioner for the European Union argued that the Chinese President Xi Jinping's scheme for this considerable economic belt was designed to transmit "Chinese goods, capital, and people through countless 21st century silk roads" and widen economic space "to enhance regional cooperation, trade, and facilitation" with the objective of promoting closer political ties. De Gucht added that while these initiatives could enhance Europe-China ties and be strategic for numerous central and eastern European countries, there remain many "uncertainties about reciprocity."

De Gucht emphasized that China's silk roads have a "geopolitical dimension both at regional and global levels." He elaborated that the Chinese hoped to covertly challenge US naval primacy in the Asia-Pacific region, through its naval policy. "China's military investment by sea is a political weapon," he concluded. "China wants to break free from its dependence on neighbouring seas now largely controlled by the US."

China vs. U.S.

"Clearly China and America each have their plan for the economic development of the Pacific," maintained De Gucht. Referencing China's criticism of the U.S.-led Trans-Pacific Partnership (TPP) as a form of "containment strategy", the former Belgian Foreign Affairs Minister examined how China was strategically pushing for regional agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Free Trade Area of Asia Pacific (FTAP) to act as counterweights to TPP and U.S. primacy in the Asia-Pacific. Stalled negotiations between Japan and the U.S. over TPP risked being dragged out, according to De Gucht, especially if the Obama administration fails to grow political will in congress for a breakthrough.

Russia's Eurasia Economic Union

Tying his analysis of China's Silk Roads with Russia's vision of a Eurasia Economic Union (EEU), De Gucht argued that Central Asia is confronted with a choice between 2 Eurasian concepts: the Eurasia Economic Union and the Chinese Silk Roads. "In my mind, Putin's dream of a Eurasia Economic Union is partly at the origin of the Ukraine crisis," argued De Gucht. He added that recent unfolding events in Ukraine have actually benefited Beijing: "the recent Ukraine Crisis has compelled Russia to turn to China for strategic partnerships," he stated.

De Gucht questioned the viability of the EEU and argued for the importance of the European Union in the economic development of former soviet satellites such as Ukraine and Poland. According to De Gucht, Ukraine's external tariff of the Ukraine would have gone up if it joined the EEU. In fact, Ukraine's economy has suffered compared to that of Poland whose income per capita has grown to become 4 times higher than the Ukraine since joining the European Union a decade ago.

Challenges to TTIP

De Gucht reflected on ongoing negotiations of the Trans-atlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union. Entering the 8th negotiation round, the TTIP negotiations have experienced numerous growing pains and setbacks, among them being issues to do with Investor-State Dispute Settlement (ISDS), differences over food safety levels, and a lack of political will demonstrated by the Obama administration and congress. "These difficulties can only be overcome by an ambitious deal reached by stressing the geostrategic implications of TTIP," argued De Gucht.

He clarified that trade today concerned the battle over leadership of rules, norms, and standards: "trade is not going to be about tariffs...it will be about disciplines with respect to subsidies, access to raw materials, caps on foreign direct investment, national content rules, and norms and standards negotiated between us that can become the global benchmark." De Gucht underscored the need for the U.S. and Europe to join together in a "rules-based system within an open architecture reflecting our common values" in order to push back against the alternative models and systems represented by countries such as China and Russia. "A successful TTIP would give the U.S. a better chance of influencing the global benchmarkes of the future," added De Gucht. "Let's hope that trade takes the upper hand."