OPP Trade Blog: Should the EU cheer or fear the US demands in its trade talk with China?

Sympathy for the Trump administration is somewhat lacking in Brussels, but when it comes to American objections to China’s perceived lack of respect for intellectual property rights or state policy of subsidising high tech industries, European leaders may have found themselves on the same side as the US President. However last weeks US-China trade talks, and the opportunity for an in depth look at the current administrations view of World trade, may suggest that a storm is brewing for the EU.

The leaked list of demands made by the US trade delegation made interesting reading and spelt out American priorities, some of which tally with Europe’s attitudes on Chinese trade. As the European Parliaments INTA committee noted in its recent debate on the state of EU-China relations, forced technology transfer is particularly high on the EU’s list of concerns about Beijing’s somewhat dubious trade strategies. Subsidies in the advance technology sector are also a particular bug bear for Europe’s manufacturers and there is unlikely to be any objection to the US attempts to pressurise China into toning down its China 2025 strategy even if America’s methods are not to European tastes.

However any belief on the part of Europe’s leaders that they can diffuse the recent trade tensions through finding common cause with the USA on China should be put firmly to bed. Even though they share a dislike for China’s commercial practices, Commerce Secretary Wilbur Ross and Director of the National Trade Council Peter Navarro also have a particular negative view of trade deficits. This view informs much of the advice that they give to the President and if Washington’s first priority is reducing the huge American trade deficit with China, then the EU’s own substantial surplus will surely be next in the White House’s crosshairs.

For the EU, this preoccupation with the size of Americas deficit may explain a lot of Trump’s tweeting and public pronouncements. Particular targets have been the relatively protected state of EU agriculture markets and the higher tariffs charged by the European Union on American cars. The leaked document from the US-China negotiations suggests that what Trump tweets about is also reflected in US Policy. If the White House wants to see less Mercedes in Manhattan and more Chevrolets on the Champs Elyse, then US demands that China reduces tariff levels are likely to also be extended to the European Union in the future. 

Any opening up of agricultural markets are unlikely to be politically palatable both for some parliament committees or for some member states and the Commission cannot be seen to reduce product standards to accommodate the American president. Additionally, appeasing Trump by trying to direct trade to America risks angering nations such as Australia or New Zealand who may lose market share, bearing in mind that the EU wishes to conclude FTA’s with many of America’s agricultural competitors this may derail other parts of the European Union’s trade strategy. Responding to Trump’s demand that the EU reduced tariffs on cars would be difficult for countries that produce mid range automobiles, especially as this would also be advantageous for other importers under the ‘most favoured nation’ clause. For the EU then, such a clear demonstration of America’s trade priorities may be something to fear rather than cheer.

Source: OPP


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