‘America First’ policy forces rethink of China-EU trade ties

‘America First’ policy forces rethink of China-EU trade ties
After US President Donald Trump hosted German Chancellor Angela Merkel for the first time in the White House on Friday, he repeated his complaints that the US has been treated ‘very, very unfairly’ in trade arrangements. However, Mrs Merkel has reaffirmed her commitment to free trade. Photo: REUTERS
Published: 4:00 AM, March 21, 2017

BEIJING — United States President Donald Trump is forcing the European Union (EU) and China to decide how willing they are to set aside trade tensions that go back decades.

As the US President pushes his mantra of “America First”, German Chancellor Angela Merkel and Chinese President Xi Jinping are taking almost every opportunity to affirm their commitment to free trade. Just last week, they agreed on a phone call “to continue their trusting cooperation” on open markets.

The challenge, say trade officials, will be using those warm words to overcome knotty issues that have soured China-EU relations for years. European angst about cheap Chinese textiles undercutting domestic manufacturers and tensions over solar power, steel and even bicycles continues to simmer.

Meanwhile, populist groups like Ms Marine Le Pen’s National Front in France are running for election on an anti-free trade ticket.

“There are still many obstacles to cooperation,” said Mr Wang Yiwei, a professor of International Relations at Renmin University in Beijing and a former Chinese trade official in Europe. “We don’t look to Europe to balance the United States, but we can hope that Europe might help with the kind of American unilateralism or its tendency to do whatever it pleases that we’ve seen in the past.”

Mixed Messages

The chiming signals by Europe and China come as Mr Xi plans a visit to Berlin this year and the US sends mixed messages on its future trade policy.

On one hand, Trump adviser Steve Schwarzman said this month that the President is likely to temper his criticism of China as time goes on, and Mr Xi may be hosted at the US President’s Mar-a-Lago club in Florida as soon as next month.

On the other hand, both Germany and China are in the US firing line over exchange rates that the White House has said unfairly boost exports.

Mr Trump’s top trade adviser, Mr Peter Navarro, has called China “the biggest trade cheater in the world’’, and said the US’ deficit with Germany will be among the toughest to tackle.

And after Mr Trump hosted Mrs Merkel for the first time in the White House on Friday, he repeated his complaints that the US has been treated “very, very unfairly” in trade arrangements.

At a meeting of the Group of 20 finance ministers and central bank governors in Baden-Baden, Germany, which ended on Saturday, China positioned itself as a defender of the global trading system, resisting US demands to move away from multilateral agreements, further highlighting the common ground between the EU and China.

Doubts, however, persist in Europe about China’s willingness to level the playing field for European companies in China.

“There are certain reforms that China needs to make and maybe they are not really ready to do that yet,” EU Trade Commissioner Ms Cecilia Malmstrom said in a Bloomberg Television interview on March 8.

“Unfortunately, the reality in China today is not so bright; it is difficult for European and other businesses to make business there.”

The Chinese, too, have frustrations. The EU, for example, has yet to grant the nation the ‘‘market economy status’’ that would make it harder to levy duties on Chinese goods sold below cost, a practice known as dumping.

Beijing is asking the World Trade Organisation to rule on whether the EU’s anti-dumping policy towards China violates international rules, a case which risks stirring up tensions as populists like Ms Le Pen surf a wave of anti-globalisation.

For all that, efforts to ease EU-China tensions could bolster the case for free-trade talks between both sides by becoming part of a grand political bargain.

“Trump has pressured China and Germany in a similar way over the currency issue and that’s increased the need for us to cooperate,” said Renmin University’s Mr Wang.

“Europe is more reliant on globalisation than the United States, so they’re very worried about its reversal. China has the same worries.” BLOOMBERG