Free and Fair Trade Club to build Middle Power Weight

This platform could be named the Free and Fair and Trade Club (FFTC) – as the emerging EU-CPTPP cooperation is focused on rules-based, free and fair trade. The FFTC would stand for about 30 percent of global GDP and also of global trade. The guiding principle should be open plurilateralism. This entails multiregional voluntary cooperation based on different topical coalitions of the willing that is open for other countries to join when they adhere to the respective rules agreed by (a subset of) FFTC members. The case for the FFTC is reinforced by the fact that the great powers, the US and China, are undermining the rules based international order by employing coercive measures. Against this background, Canadian Prime Minister Mark Carney called for an alliance of middle powers. The FFTC could become a building bloc for such an alliance.

Pooling the economic weight of FFTC members’ markets would create a power base that can be leveraged in conflicts with the great powers. If successfully coordinated, it could be used on the defensive side in two important ways: First, for mutual protection of FFTC members against a ‘divide-et-impera’ approach of the great powers. If the latter erect unfair trade barriers or use coercive export restrictions, a NATO-like Article 5 approach could ideally be created: Even if only one FFTC member was targeted by the great powers, all FFTC would stand together by supporting each other or even by coordinating retaliation. The second option would entail protecting FFTC members against unfair market distortions like massive industrial subsidies or an undervalued currency. To this aim, a trade defense measure of one FFTC member would be adopted by all other FFTC members. The FFTC could also be used for more offensive objectives. Preferential trade integration among FFTC members, e.g. in digital trade or E-commerce, would create substantial trade diversion to the detriment of the great powers. In an escalating conflict, it would even be possible to withdraw the WTO’s most-favoured nation status of the great powers –creating severe trade diversion also in goods trade.

While these far-reaching options are a longer term prospect, they should form part of the strategic thinking of the EU. There are at least ten reasons why the FFTC case should be pursued and furthered by the EU.

• The EU obtains a stronger lever to strengthen the WTO.
• The EU can raise the chances of a meaningful reform of the rules-based international trading order.
• The FFTC can be a platform for a diversified friendshoring strategy on a trusted basis.
• The FFTC offers opportunities to coordinate on the setting of new product standards.
• The FFTC can become a counterweight to the great powers and can strengthen the rule of law again.
• The EU could be in the driving seat in the FFTC.
• The EU would enlarge its footprint in the Indo-Pacific.
• The FFTC could be a new player in the new multipolar order and the bipolar hegemonial conflict.
• The FFTC can limit the divide between industrial countries and developing countries.
• Via the FFTC the EU could offer alternatives to the US and China for developing countries.-

Obviously, there is the danger that the great powers intimidate FFTC members and try to prevent them from joining forces. The US security guarantees for Europe and Asia outside China are also an important case in point in this respect. However, it would be against core US strategic interests to yield Asia to China or Europe to Russia. While this is no guarantee in view of the erratic decision making of the current US president, the Trump administration will surely take note if the EU and the CPTPP move closer and discuss the formation of a FFTC because of the economic weight of FFTC members and the entailed power of FFTC coordination.