HE Zhigao:China must keep watchful eye on US-EU trade row

With the US slapping the vaunted tariffs on EU steel and aluminum imports, the rift between the transatlantic partners has widened. To the 25-percent duty on steel and 10 percent on aluminum that came into effect from June 1, European Commission President Jean-Claude Juncker vowed retaliatory levies on some US products.

Juncker said they would resort to the WTO dispute settlement system and take necessary measures to protect the EU market. The tariff-for-tariff conflict signals an all-out rift between the allies, bringing to light the contradictions between US-EU trade norms and in global economic governance.

In order to enhance the EU's ability to benefit from trade and investment, the European Commission has formulated an ambitious agenda to supplement the bloc's economic and trade activities under the WTO framework. Brussels is negotiating or has reached free trade agreements with its partners in all continents.

An increasing number of free trade agreements have led to growing bilateral and regional trade negotiation mechanisms. The EU has been trying hard to grasp the power of discourse and leadership in setting international trade rules, but Donald Trump's "America First" strategy has put paid to such efforts.

The US used to be the biggest promoter of trade liberalization. However, Trump opposes it by advocating protectionism. Waving the banner of economic nationalism, national security and "America First," Trump is dead against free trade, which is undermining the global trade system developed after World War II.

In Trump's logic, other countries have taken advantage of the US' low trade barriers and trade agreements are flawed and unfair. So, the US has decided to impose tariffs on foreign products, skipped negotiations, emphasized reciprocal trade and protected its domestic industries from foreign competition.

Trump's policies have brought major challenges to the current global trade system. This is another hit on the global multilateral system after Trump withdrew from the Paris climate deal.

Now, the US has wielded the stick to its allies, showing that the rift is far beyond our imagination. The clash between the US and the European bloc is not only institutional and multilateral, but also at a normative and bilateral level, similar to the differences between the US and Germany.

In 2017, the EU ran a surplus of $153 billion in trade in goods with the US while the US had a surplus of $51 billion on its services trade with the EU.

The US-Europe trade dispute may lead to a wave of protectionism and bring new challenges to global economic governance.

As the global economic order is facing major adjustments and reforms, economic globalization brings together the interests and destinies of all countries. Trade policy will no longer be confined to one domestic market, and multilateral cooperation will be essential to address global trade challenges.

Some voices from the EU raised a din that China has been running a high trade surplus with both the US and the EU, and accused Beijing of restricting foreign investment and failing to protect intellectual property rights of foreign investors. Some Europeans expect the US to use its negotiating power to urge China to open up more so that they benefit from it.

China must keep a watchful eye on the US-EU tariff dispute. Beijing needs to prevent the US and Europe from uniting against China given their strong ties. After all, the security concerns still make it difficult for the transatlantic relations to fall apart and the US and the EU have lots of similarities in evaluating norms, though the US has violated the norms of multilateralism.

China must make good use of the window of opportunity when cracks occur in the US-Europe relationship. From an economic viewpoint, the Chinese government should accelerate bilateral investment negotiations with the EU, focusing not only on deeper market integration, but also on a truly inclusive and open economic agreement.

When the EU is committed to maintaining an open and rules-based trade system, Beijing and Brussels must take the lead in playing a guiding role. Their trade cooperation will create new jobs and opportunities for enterprises of all sizes.


(Contant He Zhigao:hezg@cass.org.cn