 For more videos on people's struggles, please subscribe to our YouTube channel. Hello and welcome to People's Dispatch. Today we are very pleased to have with us John Ross. John Ross is an economist. He is currently the senior fellow at the Chongyang Institute for Financial Studies at Renmen University in the People's Republic of China. John, welcome to People's Dispatch. Hello. So recently in the last month or so, the Chinese government has signed or been part of two major trade agreements. The first is known as RCEP, the Regional Comprehensive Economic Partnership. 30% of global GDP has come together in this particular economic union. And the second one was just before the new US president comes to office, Joe Biden, was the EU, European Union, Chinese Investment Deal. These are two very significant developments. I'd like you to walk us through them. John, could you first tell us a little bit of the significance of the RCEP deal and then we'll move forward? Yeah, well, there's two significances really to RCEP. The first is the economic one. The second is what it shows about the present state of world politics. So to take the first one, the economic one, this is extremely big. In fact, it's the world's largest largest trading agreement. As you mentioned, it takes in 30% of world GDP, 15 countries, and it's expected to have a major effect on the world economy raising world GDP by about $200 billion, $250 billion, depending on the estimate which is made. It's also got certain very specific important features because it's very unusual that it includes not only developed but also developing countries. Most trade agreements, not absolute yaw, but most trade agreements are either between developed countries or they're between developing countries. Certainly, if you take the scale of RCEP, it's crucial because it contains both. Also, a very important feature of it is that it was actually, so to speak, brought together by developing countries. It so happened that Vietnam was the rotating chair of ASEAN during the final stages of negotiation of RCEP. Actually, Vietnam would have been in an excellent position to block it or obstruct the signing of RCEP if you wanted to. On the contrary, all the reports in China are that Vietnam greatly facilitated the bringing together of this trade agreement. It's going to be important, therefore, because first it contains already China's largest trading average. ASEAN, a very, very crucial feature of the present COVID effect, is now that ASEAN has replaced both the United States and the European Union as China's largest trading partner. This is in line with the processes which are taking place in the world economy. If you take the projections for the next five years made by the IMF, I'm not taking these because they're going to be exactly right. They're not going to be, but the numbers are so clear that there can be a huge margin of error and it won't alter the difference. Developing the economy is going to contribute about twice as much to world economic growth in the next five years as advanced economies. Therefore, what you've done here is you put together not merely very large trading area, but you put together a very dynamic trading area. The Wall Street Journal, for example, noted this. It said, you know, this is not merely a very, very large trading agreement. It's the most dynamic sector in the world economy. Or Gideon Rachman, for example, said, you know, new facts are being established on the ground. So this is going to aid this country, particularly developing countries in Asia, of course, which are the main signatories. The second thing is what it shows about the state of the world, because of course, the United States wanted to try to block this agreement and it completely failed to do so. And it completely failed to do so, even with some of its closest allies. Japan, for example, is a signatory. And of course, it's a very close ally of the United States. So why was Japan and other advanced countries prepared to go against the United States? Because it linked them into such a dynamic trading area. Then if you look at the politics of it, in addition to what you might call the economic diplomacy, it was also the question that the United States has been trying to create bad relations between China and Vietnam. Well, this obviously completely failed, because the Vietnam played a key role in allowing the agreement to come into existence. Secondly, the United States has been trying to create a big crisis in the South China Sea, sending ships through there and trying to carry out actions which will stir up tension. And all the major signatories are in all the major countries in the South China Sea are signatories of RCEP. So this totally failed. What it showed was that the countries there, they want to get on with peaceful, quiet economic development. Doubtless, various countries will register protests about this or that boundary dispute and this type of thing. But what they really want to do is get on, they want to get on with economic development. They don't want to get on with having a big crisis. So for RCEP is therefore extremely important first, because it's a very big trading agreement, including developed and developing countries. It doesn't include the United States. And of course, it completely refutes the myth which the United States tries to put around that China is isolated, because even the United States's closest allies were prepared in Asia, were prepared to sign the agreement. So this is a real big deal, this agreement. It's interesting, as you said, that some of the major US allies signed the agreement. I think the point you made about Vietnam is very significant. The other side of Eurasia, of course, there was another deal. I mean, the RCEP is on one end of Eurasia. The other end, the European Commission completed a long negotiation with the Chinese for an investment deal. There was a lot of pressure put on France and on Germany, which was chairing this process, not to go ahead with the deal to wait for the Biden administration to come in to allow the United States to, I suppose, engineer a deal with the Europeans and so on. And yet, a month before the inauguration of Joe Biden, Angela Merkel seems to have put her foot down. The deal was concluded between the European Commission and the European Union now seems to have quite a well advanced investment deal with China. Could you walk us through a little bit this deal as well, this China-EU investment agreement? Well, again, it's the same basic process. The European Union wants to have economic relationships with China because China's going to be the largest part of the development of the world economy over the next period. Again, if you look at the projections of the IMF, the United States is going to account for about 10% world growth in the next five years, and China is going to account for around over 30%. In the lot, next two years, the situation is even more dramatic, which is China is going to account for 60% world growth. That's in 2020, 2021. Due to the effect of COVID, the EU now does more trade with China that does with the United States. So what the United States was asking Europe to do was to do something which was directly against the interests of Europe and against the interests of the EU. This is the problem for the United States with its Cold War against China, which is it doesn't merely damage China and damage the United States, damages other countries. That is, Germany has been asked to create big problems for its motor industry. At the moment, you have a very good logical economic relationship between China and Germany, which is Germany exports high quality capital and investment goods to China. It doesn't actually export cars. It produces the cars within China mainly, but it does export some cars. So Germany exports high quality investment goods to China, and China exports medium to low high quality but very good value consumer goods. This suits both sides very well. So what the United States was attempting to do was to get the European Union to act against its own interests. This is the same as principles are set where Japan wouldn't act against its own interests because Japan does a lot of trade with China. Then, of course, the other feature is the political one. Normally, the basic situation you may say in the world is roughly the following. The US wants all sorts of countries to act against their own interests by having a Cold War with China. The United States controls the situation in the United States. So there are some people who don't like this, but basically it controls the situation. In most developing countries, they refuse to go along with this. They can't destabilize their situation. For example, the idea of banning Huawei from Africa or banning Huawei from Middle East would very seriously damage the telecommunications system throughout Africa or the telecommunications situation throughout the Middle East. Europe is a bit in the middle because it's got more economic brunt from maneuver than developing countries, but not as much as the United States. In this case, exactly as you said, the European Union put its foot down and said, no, you're asking us to act directly against our own interests and we're not going to do it. Certainly, this was an indication not merely to Trump, but it was an indication to Biden as well because, of course, the agreement was carried out just a month before Biden. A number of people, the more pro-US people, for example, in Britain, the Financial Times said, well, wait, wait, wait, wait for Biden comes in, don't sign it now, and the European Union decided to go ahead and sign it. So this is another big political success for China. It's an economic success, but also a geopolitical success. So obviously, therefore, both of these are very important. Although Japan, for example, joined RCEP, the most important countries that are going to bring to the RCEP, the majority of the countries there are developing countries. In the European Union, of course, they're advanced countries. So the importance is that China has signed big agreements both with developing countries and with advanced countries, more or less simultaneously. And that's obviously extremely important. Let's stay with the politics for a few minutes because what you said about Germany, I mean, you know, Germany took the leadership in this investment agreement on the mid-December, somewhere around the 18th of December, the German cabinet sent legislation to the Bundestag essentially saying that the company Huawei can operate building 5G equipment inside Germany. The United States, especially under Donald Trump, had made Huawei a prestige issue. Going from country to country, effectively telling them you can't use Huawei, you can't use ZTE and so on. In fact, Canada picked up senior executive of Huawei. She's still facing extradition and so on. The United States really made it a serious prestige issue. And here, almost in the cover of darkness, the German cabinet decided, well, let's go ahead with Huawei. Wall Street Journal complained, you know, in the way that the Wall Street Journal complained. But I didn't see much coverage of this anywhere in the world that Germany, right before Biden comes in, not only pushes for the signing of this investment deal, but allows Huawei to come in and build 5G equipment inside Germany. How are we to understand the politics of this US-imposed war on China, particularly from the standpoint of Europe? How do we understand what Europe is doing? Well, what the fundamental thing is that countries have a limit at which they can act against their own interests. While, for example, the events of the 6th of January, the storm of the Congress are extremely dramatic and so on. Actually, the US capitalist class pretty much controls the situation in the United States. It succeeds in defeating Sanders. Biden will doubtless change a few tactics for dealing with China and other things. But I wish we could say that socialism's approach in the United States or something, but it's not true. On the other hand, many developing countries can't do that. They can't afford it. If they don't use Huawei equipment, they're going to pay a lot more for it, for their 5G. They're going to make mobile phones more expensive. These mobile phones are going to be delivered later. This is a much more serious thing. It's a much more serious thing to ask people in countries in Africa or countries in the Middle East to pay more for their mobile phones than it is to ask them to pay a bit more in the United States or even in Europe. The real places in the world, in my opinion, which it's not clear who is going to be successful in what we might say the competition in China and the United States. Most places in the world, you know who's going to win. In developing Asia with the exception of India, basically China is going to win. In most of the Middle East, most of Africa. On the contrary, in North America, the United States is going to win. The two places which are not clear is the situation in Latin America, which is wish to move out from being the United States backyard and many countries have. It's interesting, for Bolsonaro, a Brazilian president, he was prepared before he became president, became very adventurous things, such as playing around with the Taiwan separatists and people of that type. But actually when he came to be the president of Brazil, even he couldn't really act against the economic ties between Brazil and China because China is much too big a market. Also if he does, other Latin American countries can move in. If Brazil was to create bad relations with China economically, then Argentina will say thank you very much and move in on this situation. So one place where the outcome, and then you also have the situation, there are some left-wing regimes such as governments such as Venezuela, obviously in Bolivia where China had signed agreements to help Bolivia develop its lithium, so therefore Latin America is not clear. The other place is Europe. On the one hand you have Britain, which is basically would like to be the fifth or the government, would very happy to be the 51st state of the United States, except that the United States won't give it a vote. So it can't even be the 51st state, it would have the sort of status of Puerto Rico or something like that. And then you have Germany for which the China has become a more important economic partner than has the United States and this is going to continue to develop. And therefore there is the political tensions which is going on through Europe. So I think these two places, Latin America and Europe are going to be the key areas where there's going to be competition, not where there's going to be competition, where the outcome of the competition is not extremely clear between China and the United States. This is a very important discussion and I want to return to you to talk again about Latin America, China and the United States. But just to pivot back to RCEP, there are lots of complaints of trade agreements of this nature that they would actually wipe out jobs in countries and so on and advantage one country against another. How do you reflect on something like RCEP, which on the one side geopolitically is an advance from the US unipolar system? How do you address the worries that people have of these trade agreements which have historically hurt countries that have not been strong enough to develop themselves by trade? I think that this is a misunderstanding. The what is affected is what the situation determined by the domestic policies, which the countries follow. If you look at the situation in Asia, which is the most successful region for developing countries, it's where the fastest economic growth is, where you have the greatest numbers of people being lifted out of poverty. You have a situation there which is described in economics as the flying geese formation. What that means is there is a lead economy, you know when geese fly, they fly in a V shape. This means that there is a lead economy, which is the most advanced technologically. It goes forward, it trades with the others and the others gradually go up market. If you look at China, if we went back to China, we looked at China 30 years ago. What was China producing? China's producing fireworks, toys, simple textiles. Then it developed technologically, it grew for 10, 15 years. It started producing personal computers, smart phones and things like that. Now it's going into cashless payment systems, 5G telecommunications. It's gone forward in that way. Look at the situation in Vietnam. Again, if you go back for 20 years in Vietnam, you're looking at a country which is producing textiles, very, very simple products. Vietnam is still sometime behind China, but the whole Southeast Asian region has gone forward. Really, there is here a particular issue which is sometimes misunderstood about globalization. There was a book by Thomas Friedman called The World is Flat. That implies that what does is globalization eliminates geography. That's not true. What is more the case in the world is that it is true that the old European-sized nation state is too small an economic unit now. What you really have is you have regional economies, which are what I would call continental-scale economies. One is obviously the situation in North America, which contains the United States, Canada and Mexico. This is a huge economic unit. If you look at the situation, the European Union is another huge economic unit, bigger than the nation states. Another one is in the question of Asia and particular East Asia. Now the peculiarity of Asia is that Asia is so big that there should be at least two there, which is if India could get its act together. India could be also a central pole with other countries. Unfortunately, India is not pursued a very sensible economic policy and therefore is not really able to act as a stimulus to the entire region in the way that China is. Now what you see some protests at the same time happening is in Africa, you have movements to try to create regional trade, blocks there, agreements and you did, particularly in Latin America, when you had at the time of the pink wave. What's important about this is that the United States attempts to block the formation of such regional trade agreements because it wants all the trade to go to the United States, particularly in the case of Latin America or in the case of Africa. China on the contrary supports these regional trade agreements and that's what you're going. So you're really, we're a bit ahead of ourselves, but what we really need is you need a continental-scale economy in Africa and you need a continental-scale economy in Latin America. At the moment we've only got three in the world. But the question of that is therefore the countries have to understand that the national scale of production in the modern economy is too small. You mustn't confuse patriotism and protectionism. There is nobody who is a stronger patriot for their country than for example for Deng Xiaoping or Xi Jinping. They're extremely strong Chinese patriots and obviously the government of Vietnam for example, which is country I know a bit about its economy, is also very strongly patriotic, but they're not protectionist. They understand that they want to create a strong country to upgrade their country technologically to move it away from commodity production, which is what Asia has been doing very successfully. Asia has centered its development on industry, not on commodity production and therefore the interaction of the countries in Asia creates a major development for the construction industry. I would be absolutely delighted if Latin America and Africa were pursuing the same path, but the problem is not the trade. The problem is the domestic policies, which are being pursued by the countries. Basically the developing countries of Asia have got policies which align. If you look at Indonesia, Vietnam, Laos, Cambodia, Malaysia, they have forms of economic trade in which their countries interrelate. So it's not the trade that's the problem. It's the domestic policies. That was a fantastic and important intervention there, which brought us into the theoretical discussion about the difference in our understandings of trade and development. John Ross is the Senior Fellow at the Chongyang Institute for Financial Studies at Renman University in the People's Republic of China. John, thanks for joining us at People's Dispatch. Very pleased. Thank you. We'll see you again then. Okay, thanks.