China's new position in global economic governance

By John Ross
0 Comment(s)Print E-mail, February 10, 2016
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The contrast is still clearer if the content of the proposed TPP is examined. Instead of being based on the most dynamic sectors of the world economy, which would include China, the TPP is an agreement between a group of economies declining in global economic weight. In 1985, economies in the proposed TPP accounted for 54 percent of world GDP. By 2014, this had dropped to 36 percent.

The TPPs main mechanisms are aimed at protecting the position of the US and its companies. Under the TPP, private companies, principally US ones, would have the right to sue participating governments in courts which will be dominated by the US, whose decisions are binding on national governments.

In contrast to the narrow TPP, China has advocated a wider multilateral Asia-Pacific Free Trade Agreement. Therefore, in trade, as the with IMF reform, China has been pursuing a multilateral approach, whereas the US has made a turn from earlier post-World War II support for multilateral agreements and organisations to unilaterally pursuing US interests. As most other countries benefit greatly from a multilateral approach, in which they also have a role to play in negotiations, why now is there this contrast in approach between China and the US and will it continue?

The US turn is clearly in line with what was advocated in 'Revising the US Grand Strategy Towards China', a policy paper published by the prestigious US Council on Foreign relations. This argued bluntly that the US should create 'new trade arrangements in Asia that exclude China.' Instead, the US should seek to begin 'creating new preferential trading arrangements among US friends and allies to increase their mutual gains through instruments that consciously exclude China.'

The reason for this shift is clear. Contrary to the myth the US promotes, that it is a uniquely 'dynamic' economy, the reality is that the US economy has been slowing and its weight in the global economy declining. From 1984-2014, the US share of world GDP fell from 34 percent to 23 percent at current exchange rates. Taking a 20 year moving average, to eliminate the effects of short term business cycle fluctuations, average US GDP growth fell from 4.4 percent in the late 1960s to 2.4 percent by 2015.

Therefore, as Philip Stephens of the Financial Times summarised US goals, 'China has been the big winner from the open global economy.' The result is that the US 'has given up on the grand multilateralism that defined the post-war era.'

In summary, these economic trends explain and will strengthen the recent pattern whereby China has become the main pillar of adapting and extending existing global multilateral economic governance institutions, while the US takes a turn towards adopting a unilateral approach.

The writer is a columnist with For more information please visit:

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