Thu, Jan 11, 2018 - Page 9 News List

Europe between Trump and Xi

Caught between China’s outdated idea of multilateralism and Trump’s intention to get rid of it altogether, Europe must act as a single entity to secure its trade interests

By Zaki Laidi

Illustration: Mountain People

The most recent WTO ministerial conference, held last month in Buenos Aires, Argentina, was a fiasco. Despite a limited agenda, the participants were unable to produce a joint statement.

However, not everyone was disappointed by that outcome: China maintained a diplomatic silence, while the US seemed to celebrate the meeting’s failure. This is bad news for Europe, which was virtually alone in expressing its discontent.

It is often pointed out that, in the face of US President Donald Trump’s blinkered protectionism, the EU has an opportunity to assume a larger international leadership role, while strengthening its own position in global trade.

The free-trade agreement recently signed with Japan will give the EU a clear advantage over the US in agriculture and strengthening trade ties with Mexico could have a similar effect, as the US renegotiates the North American Free Trade Agreement.

Some suggest that, to strengthen its position further, Europe should team up with China, which, despite its reticence at the WTO conference, has lately attempted to position itself as a champion of multilateralism.

A Sino-European partnership could be a powerful force offsetting the US’ negative impact on international trade and cooperation.

Yet such a partnership is far from certain. Yes, Europe and China converge on a positive overall view of globalization and multilateralism. However, whereas Europe supports a kind of “offensive multilateralism” that seeks to beef up existing institutions’ rules and enforcement mechanisms, China resists changes to existing standards, especially if they strengthen enforcement of rules that might constrain its ability to maximize its own advantages.

Europe’s desire to force China to adhere to common rules aligns its interests more closely with the US, with which it shares many of the same grievances, from China’s continued subsidization of private enterprises to the persistence of barriers to market access.

According to one recent study, market access barriers erected by China have taken a high toll on the growth of EU exports.

However, the US and the EU do not have the same vision for how to address these grievances. To limit abuse of WTO rules by China, Europe’s leaders want to be able to negotiate new, clearer rules, either through the framework of a bilateral investment agreement or through a plurilateral agreement on public procurement.

Trump does not want to reform the system; he wants to sink it. In fact, with Trump seeking to use bilateral deals to secure reductions in the US’ trade deficit, the possibility that the US will leave the WTO altogether — a nightmare scenario for the EU, which advocates shared norms over force — cannot be excluded.

Trump’s predecessor, former US president Barack Obama, had his own solution. New multilateral frameworks — the Trans-Pacific Partnership with Asia and the Transatlantic Trade and Investment Partnership (TTIP) with the EU — would circumscribe China’s room for maneuver.

As such frameworks brought about regulatory convergence, the US and the EU would be able to define the standards of the emerging new global economy, forcing China either to accept those standards or be left behind.

However, this project has now been fatally undermined. Obama’s effort to finalize both agreements before the end of his presidency, though understandable, bred serious concerns about hastiness.

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