China’s Waiting to See What the UK Can Get Out of Brexit – Economist

Sputnik: How would you assess the results of Mr. Hunt's first visit to China?

Alicia Garcia Herrero: I think it is a weird visit in the sense that Hunt feels the need to talk about a free trade agreement between the UK and China. The UK started or planned to start negotiations right after Brexit was decided, right after the referendum which was even earlier than it is today in the sense that the UK was obviously not ready to negotiate, even not allowed in a way legally by this situation with Europe.

So in a way by going back and forth with this idea of advancing this, how he could even negotiate with China it's only showing China its weakness. It's only showing China that the UK is desperate to reach an agreement with China once it's free from its current situation in terms of trade links with Europe, right after Brexit is finalized. And thus this is only showing China that maybe that's not the way to start.

China in fact and we've written a blog in BRUEGEL about this, will clearly start with Europe. That's at the end of the day between two-thirds, three-fourths of the European economy. And by starting with the UK it would only hurt its relations with Europe because, especially if the case of a hard Brexit, the UK cannot offer an entry for China to Europe.

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So in a way by going back and forth with this idea of "wait for us, we're ready for the free trade agreement with China" is only showing China that the UK is in a very weak position. So that's the one thing that should have been in the core of the visit, I would have rather focused on things that the UK can control better.

Sputnik: How can China's willingness to cooperate with London post-Brexit impact London's upcoming talks with Brussels?

Alicia Garcia Herrero: As I said, I think the "threat" or possibility of a UK-China FTA is actually not a threat to Europe. If I were the UK I'd rather more go with things that could eventually work with China, for example, investments, rather than focus on a potential trade agreement that China will not be willing or if it does it would be at a very high cost for the UK in terms of negotiating power.

So in that regard I'm not sure it's going to influence the negotiations because there's not much that the UK can show to the EU in terms of potential trade agreement with China. So the answer to your question is not really, it's only showing its weakness as I've said, it's only showing that the UK has no options to negotiate a big trade agreement with a big area unless it's very clear that they can offer access the European market.

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The UK is a small economy today and this is a situation to focus on things you can control, investments, in my opinion, attracting Chinese investments, to be imaginative to reach an agreement in trade and perhaps financial services.  We don't even have a bilateral agreement with China today we have national agreements so the UK could play that card in other words. I don't think it can play the trade card.

Sputnik: What benefits are there for China in negotiating a trade deal with the United Kingdom?

Alicia Garcia Herrero: The clear benefit would be that if the UK has a soft Brexit option, the customs union with Europe, because then China could access Europe through the UK without needing to sign, which is actually very difficult because the European Union doesn't want it yet, a free trade agreement with Europe. That would be the clear benefit, but the point it that that's very unlikely.

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The UK may not have that customs union let alone a single market. So for China the option is really not there, I would say China's waiting to see what the UK can get out of Brexit, i.e. if it really a soft Brexit then China has an interest. But if it's not, the conditions will be bad for the UK because these would only delay in a way, China's negotiations with Europe; it's a much larger market of more interest for China.

So if the UK does have a soft Brexit it will be very interesting for China, but if it doesn't I don't think that China would be interested.

The views expressed in this article are solely those of Professor Alicia Garcia Herrero and do not necessarily reflect the official position of Sputnik.