Well, that certainly didn’t take long. With the ink barely dry on the Part 1 trade agreement between the United States and China, the European Union said that the deal could violate the rules of the World Trade Organization. EU Trade Commissioner Phil Hogan said his team will scrutinize whether China’s pledge to increase purchases of U.S. goods and services by at least $200 billion over the next two years is WTO-compatible. “We haven’t analyzed the document in detail, but we will and if there’s a WTO-compliance issue of course we will take the case” to the World Trade Organization Hogan told a conference on Thursday in Washington. “We’re not trigger-happy about taking cases to the WTO — we don’t want to create that impression. But we’ll stand up for our own economic interests.”
I’m not a lawyer and I don’t even play one on TV, but my read of the agreement–with its provision to require China to purchase goods from the United States–does indeed violate WTO rules.
In other words, see you in court.
Why the quick response by the Europeans?
Because the United States and the European Union have been engaged in a low-temperature trade war since 2018 when the Trump administration invoked national-security considerations to impose tariffs on steel and aluminum from Europe. The European Union retaliated with tariffs on U.S. goods including Harley-Davidson Inc. motorcycles and Levi Strauss & Co. jeans. A subsequent threat from the White House to hit the European auto industry with higher tariffs on the same national-security grounds has led to a truce and a pledge by both sides to work toward reducing tariffs across the board.
Except that there have been no negotiations. The Trump administration has refused to start talks unless Europe includes agriculture in them. (Agriculture is a hot-button issue with the European Union where carefully negotiated subsidies, regulations, and quotas underpin a sector that is, in many counties, central to national identify.
The U.S. has also imposed tariffs on EU products in retaliation over government aid to Airbus the was ruled illegal by the WTO. Meanwhile the European Union is moving ahead with a parallel case at the WTO against subsidies to Boeing.
The latest conflict is over a U.S. plan to apply duties on $2.4 billion of French goods–from cheese to handbags–in retaliation over a digital-services tax in France that the Trump administration alleges discriminates against American technology companies such as Google, Apple, and Amazon.com. In the dispute the Trump administration is pinning its position on the same law that it used in its trade war with China.
Hogan delivered his comments on WTO and the China agreement from Washington because he’s been there for the last three days trying to persuade the Trump administration to scale back its protectionism on trade and to go back to the free-trade system underpinned by the WTO. (The Trump administration has also been working to weaken the WTO’s ability to follow up on alleged violations of its rules.)
Good luck with that, Mr. Hogan.
I know you’re probably tired of the whole trade war thing–I know the market is–and hoped that the issue would be put to bed for a while by Wednesday’s agreement.
Sorry about that.
It will most likely take the European Commission as much as a week to analyze the U.S-China trade deal and then a couple of months to send any perceived violations of WTO rules to member national governments.