MNI EXCLUSIVE:US-EU-JP Trade Pact May Displace China: Advisors

     BEIJING (MNI) - Chinese government advisors told MNI that the establishment

of a US-EU-Japan trade pact is a likely scenario, which could undermine China's

trade strength, making it even more important for the Asian country to cultivate

allies and pursue a more flexible approach.

     "Now we are in a disadvantaged position," said Wang Huiyao, president of

the Center for China and Globalization (CCG), an independent think tank that

advises the government on globalization and international trade.

     "The U.S., the EU and Japan will sooner or later negotiate a free-trade

agreement," he commented, citing the apparent U.S.-EU trade truce reached last

week and the EU-Japan free-trade deal signed earlier this month.

     "The U.S.-China competition is expanding into the global market, where both

sides are trying to compete for allies," Wang noted. This is illustrated by

Chinese officials' recent visits to Japan and various BRICS and EU countries, as

well as the Trump administration's recent efforts to improve relations with the

EU and Russia.

     --WTO IRREPLACEABLE

     Most advisors interviewed by MNI predicted that the U.S., EU and Japan will

not abandon the WTO, as doing so would not be in their interests.

     "Developed countries are the major beneficiaries of the current WTO

system," said Wang Haifeng, director of international trade and investment at

the Institute for International Economic Research, which is affiliated with the

National Development and Reform Commission.

     Wang Haifeng added that the U.S. is well aware of the benefits of WTO

membership and the dollar-dominated global trade system, thus won't easily give

up on the current structure.

     Liu Hong, a director of the Ministry of Commerce's China Association of

International Trade, echoed Wang's comments in a separate interview.

     "The WTO system is irreplaceable," Liu told MNI. "If the U.S. wants to

reach its goal of 'America first,' it only needs to use the WTO system because

it's the least costly way." He said that the WTO's role in gathering 164

economies into a single trade framework helps developed countries better take

advantage of other countries' resources.

     However, more bilateral and multilateral free-trade zones could be

established to complement WTO, Liu added.

     --'DANGER' FOR CHINA

     A possible U.S.-EU-Japan trade pact would mean "danger" for China,

increasing the stakes in future trade talks with the U.S., a commerce ministry

official told MNI.

     Noting that a potential U.S.-EU-Japan trade pact could lead to job losses

and other worse situations, Wang Huiyao suggested that Beijing speeds up

collaboration with other trading partners.

     "The U.S. now is trying to win support and allies everywhere, such as

mending fences with Japan and the EU; China should initiate some strategies, as

we can't sit and wait passively," he stated.

     Wang said China should continue to nurture relations with Japan, such as by

signing up to the Comprehensive and Progressive Agreement for Trans-Pacific

Partnership.

     --STRENGTHEN TIES

     China should also strengthen ties with the EU and accelerate the

establishment of a free trade agreement with India, he said.

     "At the same time, we need to find opportunities to negotiate with the

U.S.," he said, adding that Washington may even initiate talks if China succeeds

in reaching deals with Japan and the EU.

     "The U.S. may have a thousand strategies, but we have our own way of

dealing," which is to wait and see, MOFCOM advisor Liu Hong told MNI, adding

that Beijing continues to welcome talks should Washington be willing to come to

the table.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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