The TTIP: A Challenge to China's Hegemony Dream on the Global Stage?

11/11/2015 12:53 GMT | Updated 10/11/2016 10:12 GMT

The Transatlantic Trade and Investment Partnership (TTIP) has sparked much controversy. Noticeably, instead of focusing on reducing tariffs, the TTIP proposes to align the U.S. and EU's currently incompatible rules and regulations. Although opposition is voiced most loudly in several EU countries where citizens strongly wish to maintain their high standards in industries such as food and beverage, the TTIP would also have significant impacts internationally. This article focuses on its impacts on China.

Although China had relatively lagged behind the MEDC's including many EU countries and the United States in terms of its initial infrastructure, advanced materials, R&D, and policy frameworks in the past decades, one should not rule out the possibility for China to catch up and become the next hegemon. Among the reasons why the Chinese are optimistic that China may surpass the U.S. in the next decades is that since it joined WTO in 2001, China has strived to be at the winning end of the WTO.

For years, the label "Made in China" has sounded derogative in its connotation of low-quality manufacturing using cheap labor sources. However, the Chinese government, ambitious to make China the world's next hegemon after the United States, has recently devoted increasing attention to alter the situation. Instead of attempting to keep profiting from its status as the world's largest manufacturing economy, China has strategically shifted its focus to introducing better technology and tighter regulations. These are done partly through the government's recent introduction of new policies that encourage technological innovation, economic structure transformation, domestic branding, corporate governance, research and development (R&D), and its further strengthening of trade partnerships with other nations or regions. Examples of such policies include "Made in China 2025" and "One Belt One Road (OBOR)". Further, the country imposed stricter standards and tighter regulations in areas including food safety and advertising earlier this year, further demonstrating a readiness and determination to lead as the next hegemon not just within the BRICs community or amongst members of the new China-initiated Asian Infrastructure Investment Bank (AIIB), but also internationally. 

It is rather ironic that simultaneously as the EU faces the possible need of loosening its rigid regulations such as food safety policies that are so integral to the region's proud identity per the TTIP, China is working hard to tighten them. For China, the TTIP may threaten to reduce its competitive advantages. Already, one could observe that Chinese costs of production are not as cheap as they were, with rising costs in China combined with pressures posed by offers of relatively cheaper production costs in less developed nations. With the EU's possible deregulation per the TTIP, the picture may look less optimistic for China. Despite that tariff reduction between the U.S. and EU countries is not the primary target of the TTIP, one should observe that such trade barriers are already low. The further reduction in trade barriers through deregulation could be seen as a geopolitical strategy employed by the U.S.: one that can threaten China's hegemony dream by increasing China's costs of participating in globalization. If the TTIP were to be passed, China might need to brainstorm even more effective approaches to incentivize European countries to further trade with itself, when EU nations could trade with the United States with lower transaction costs enabled by the reduced regulatory barriers and already low tariffs.

Of course, the future does not look entirely pessimistic for China in terms of its position in the world, nor has the question of "Will China's hegemony dream be diminished by the TTIP?" got a black and white answer. In fact, the situation between China and the United States in terms of obtaining (for China) or securing (for the U.S. in the current stage) global hegemony may resemble an intense tug of war where one cannot clearly predict future outcomes. We should recall that simultaneously as the United States attempts to secure more successful years as the most prominent global leader using means including the Trans-Pacific Partnership (TPP) and the TTIP, China has already started to brainstorm creative ways to advance its hegemony dreams. China's recent plans in increasing the number of investments in, and cooperation with the United Kingdom and the aforementioned examples of the AIIB and policies including "Made in China 2025" and "One Belt One Road" may prove to be effective in allowing China to execute further trade agreements with existing partners, or initiate new agreements with other nations. Whilst these approaches may not bring significant benefits to China in the immediate short term, they may allow China to move a few steps closer in fulfilling its hegemony dream in the medium to longer time frame.

The TTIP challenges the established international system (e.g. the WTO) and the norm of path dependency where international systems are usually hard to be reshaped. This raises important questions for all: What will happen if multilateral trade agreements no longer go through the WTO? Who should be the hub of all these trade agreements? Who will make the rules on the global stage, and what rules will be there? It may take years to see whether the TTIP and TPP mean less power and future influence for China on the global stage, especially in relation to the United States. Perhaps, only time will tell.