UK, China Leaders to Weigh Deeper Trade Ties, Economic Integration

1 February 2018

UK Prime Minister Theresa May is travelling through China this week for a series of talks with Chinese officials, with the meetings slated to focus on potential areas for deeper trade and economic integration, as well as trade irritants or concerns. 

The meetings began on Wednesday 31 January, with May and Chinese Premier Li Keqiang discussing trade, security, and other areas of cooperation. The trip has already been preceded by public statements on what officials wish to see from the discussions, with the UK leader due to meet with Chinese President Xi Jinping on Thursday. 

May told reporters on the way to China that the UK would be interested in inking a trade deal with Beijing in the future, and in the meantime will be looking at ways to eliminate some existing trade barriers between them, according to comments reported by multiple media outlets. 

How leaders will broach the subject of a trade agreement over the coming days remains to be seen. Another issue that will be closely watched is how leaders address the subject of the Belt and Road Initiative, the Chinese-led infrastructure plan that has already drawn interest from dozens of countries and international organisations and would lead to projects connecting China’s easternmost regions to the furthest reaches of Europe. (See Bridges Weekly, 18 May 2017

The UK has not yet endorsed the plan, and whether it will do so in the future remains in question. In a joint press conference with Li on Wednesday, she noted that her country “is a natural partner for the Belt and Road Initiative with our unrivalled expertise.” 

May also noted that she and Li have spoken about how their respective governments “can continue to work together to identify how best we can cooperate on the Belt and Road initiative across the region and ensure it meets international standards,” according to a transcript of her remarks released by her office. 

Prior to the trip, May penned an op-ed for the Financial Times which noted that UK-Chinese trade has already been a boon for domestic businesses, opening markets and providing sources of valuable capital for forthcoming investments. 

May also referred to Chinese President Xi Jinping’s pledges for further economic reform, as outlined during the country’s high-level “Party Congress” late last year. (See Bridges Weekly, 2 November 2017) 

“The sheer economic weight of China means that the way in which this happens will have a huge role in shaping the future in which we live,” she said in her piece, explaining her interest in pursuing greater economic cooperation with Beijing. 

She flagged the UK’s interest in supporting regional infrastructure investment, such as through participating in the Chinese-led Asian Infrastructure Investment Bank (AIIB), where it is one of the non-regional members. However, she also referred to areas where the two sides could cooperate more, such as industrial overcapacity, particularly in steel, as well as intellectual property rights concerns and WTO rule enforcement. 

Meanwhile, an article in Chinese state-run newspaper Xinhua suggested that the meeting would “chart a new course for bilateral relations,” highlighting the large bilateral trade flows that already exist between them. 

Brexit in the background

May’s trip to the Asian economic powerhouse comes as her country continues its Brexit negotiations with the remaining 27 EU member states, with the latter group having endorsed final directives for EU negotiators on how to address a planned “transition period” for when the UK leaves the bloc, including on trade. 

According to a Commission press release explaining the directives, the EU says that “as the UK will continue to participate in the customs union and the single market (with all four freedoms) during the transition, it will have to continue to comply with EU trade policy, to apply EU customs tariff and collect EU customs duties and to ensure all EU checks are being performed on the border.” 

The release further says that during the transition period, which it says should end by 31 December 2020, the United Kingdom “will not become bound by international agreements in its own capacity in fields of competence of EU law, unless authorised to do so by the EU.” 

Negotiators from the EU say that they hope to wrap up talks later this year, in order for their legislature to approve a Brexit deal in time for the expected date of the UK’s exit, which is March 2019. How the UK will respond to these negotiating demands will be a closely watched subject in the coming months. (See Bridges Weekly, 18 January 2018

In the nearly two years since the Brexit referendum, the UK has already been exploring where it could ink new trade deals or otherwise deepen economic ties with non-EU countries once it has left the bloc. Domestic officials, including May, have met with top officials from Australia, Canada, India, New Zealand, Switzerland, and the US, for example, to weigh options, with plans already on track for UK-Australia and UK-New Zealand trade deals to be negotiated in the post-Brexit era. (See Bridges Weekly, 6 April 2017

ICTSD reporting; “U.K.’s May walks tightrope between trade and politics on trip to China,” JAPAN TIMES, 31 January 2018; “The global trading system works when we all play by the rules,” FINANCIAL TIMES, 30 January 2018; “Highlights of China-UK economic and trade ties,” XINHUA, 31 January 2018.

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