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US-Europe trade agreement: A reasonable appeasement?

CIIS Time:08 05, 2018 Writer:Cui Hongjian Editor:Wang Jiapei

In the absence of optimism beforehand, European Commission President Jean-Claude Juncker and US President Donald Trump recently reached an agreement: the EU and the US agreed to settle down trade frictions between the two sides in a more “constructive way.”

It is perhaps more reasonable from the perspective of Junker because Europe needs to avoid huge losses in the punitive tariffs that Trump had threatened to impose on European auto exports to the US.

However, at a critical moment when the international community needs to cooperate to meet the challenges of unilateralism and protectionism, the EU’s behavior is more like a unilateral compromise in a manner of appeasement.

A marriage of convenience under pressure

As early as the US imposed tariffs on steel and aluminum on trade bodies including Europe, there was a debate within the EU about compromise or resistance. Considering the limited impact of steel and aluminum taxation on its economy, the EU adopted a position of not being pressured by Trump’s blackmail, taking retaliation measures and maintaining the multilateral trading system with other partners. 

But the EU has never given up seeking compromise with the US and is looking for the right time and available chips.

After Trump threatened to continue to impose punitive tariffs on imports of cars and parts, the EU was still verbally tough by claiming "not to accept the negotiation of the gun on the head," but some major member states such as Germany were more eager to seek compromise with the US, because the automobile tariffs will affect the EU's tens of billions of dollars in auto trade and affect the employment of millions of people.

At the same time, the US started to suffer a backlog of agricultural products due to trade retaliatory measures and had to raise agricultural relief, Trump's trade war needs a buffering time.

This had become an opportunity for Europe and the US to achieve this marriage of convenience. In this context, it is difficult for the EU to pretend to be the winner: what it got from this deal is Trump’s unreliable promise of “pausing” the motor tariffs and negotiating with the EU “toward zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods.” 

But the price is that the steel-aluminum tariff has not been lifted, Europe has to expand the purchase of US soybeans and LNG. The EU's compromise seems to ease the trade war crisis, but it succumbs to unilateralism making it lose much more than on paper.

A right path to free and fair trade?

Seeking to establish “free and fair trade arrangement” was interpreted by the EU and the US as their moral justification for the deal, but the international community is not entirely convinced.

First of all, although both sides claim that “together (they) count more than 830 million citizens and more than 50 percent of global GDP,” this does not prove that they have sufficient right to determine the trade rules of the world. Most of the challenges facing the world economy and trade in recent years have originated from the system and rules that the US and Europe have previously dominated. 

So what Europe and the US want is not to “make our planet a better, more secure, and more prosperous place,” but a world in which they can continue to maintain competitive advantage, enjoy the superior position and determine the fate of other economies. 

Second, in order to seek compromise, the EU and the US had irresponsibly transferred their own problems to attack other economies’ unfair trade practices in the name of “reforming the WTO.” 

Although not stated in the agreement, Juncker publicly accused China of adopting unfair trade measures in his speech to an American think tank. China, the United States, and the EU are important trading partners of each other, it is normal for trade frictions and competition between them due to their differences in industries and trade structures.

Despite this, China has always complied with WTO rules and tried to seek dispute resolution within a multilateral framework. Just a few days ago, Juncker had just called for the opposition to American-style unilateralism and protectionism and to promote WTO reform accompanied with Chinese leaders in Beijing. 

His tumultuous practice is not only a matter of personal credibility but also doubts the EU's sincerity in adhering to multilateralism and the WTO mechanism.

Finally, reform towards a more free and fair trade should transcend the narrow Western-centric view, so that the future international trade pattern and global governance system can better adapt to the era of globalization of openness, tolerance, and inclusiveness. 

The trade war provoked by the US is a counterattack of the old unfair order. The appeasement of Europe may bring more difficulties to the establishment of the new order in the short term, but it is not enough to change this trend.

 

 

Cui Hongjian is the director of European Studies at the China Institute of International Studies.

 

 

Source: CGTN, August 3, 2018.

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