Tuesday, June 26, 2018

US Tariffs Wake-up Call for EU to View China as Partner
By Carlos Santana
Global Times
2018/6/25 22:53:40

Since Donald Trump announced his intentions to run for the presidency of the US, the whole world has claimed that Trump is a problem. However, this is inaccurate. Trump is not the problem, but a consequence. In other words, he is just the tip of the iceberg.

The real issue runs deeper than one man: millions of Americans are unable to survive in a system that has forgotten about them and does not present a realistic plan for the short or medium term. Something similar is happening with the so-called trade war.

It has been perceived as the final step in a huge path of disagreement between the US and China, but this is not correct. The trade war is an instrument, but it is not the end in itself. The new tariffs and taxes will affect the trade balance between all actors, covering practically the whole world, but they are not designed as the solution - just tools for a different goal.

The Trump administration is not focusing only on the current trade balance, and thus the items, industries and services that both countries exchange right now. It is also looking forward to protecting key areas for the future. Just like China, the US is planning its economy for decades to come by raising tariffs in areas like aerospace, tech and machinery - industries in which China currently is not a strong supplier for the US.

The truth behind the "trade war" is that it is the battle for world hegemony. In order to achieve that, the US is playing "divide and conquer" among the most important economies, including the EU, Russia, Japan and Iran by making them choose sides. The real competition is not about trade, but about innovation and leadership by limiting their main rival in the long run.

Of course, the US has the right to look out for the best interests of its people, but so does China, as does Europe. In the EU, the fact that the US, its most important ally and traditionally a model to look up to, decided unilaterally to impose new tariffs and increase protectionism was not welcomed at all. The move by the US was not a "declaration of war" but a wake-up call to look at China's promising future and encourage the EU to view China not as a rival but as a partner.

As the new strategy game has started, several choices have appeared on the EU's dashboard. Reacting to US provocations could be one of them, but is definitely not Europe's style. In Europe, decisions are taken at a different speed than in China or the US, so no immediate dramatic measures should be expected. Perhaps on other occasions, such as the global economic crisis, the rhythm of EU institutions reacting to problems has not been an advantage. But this time it could be.

First, Brussels will need to listen carefully to what Beijing has to offer and pay attention to how the current trade war is unfolding. In addition, the current situation should be read as a clear opportunity for explaining to China's leaders the needs and demands of the EU.

Secondly, the new multilateral world, featuring a US administration inclined to protectionism, will require a rebalance in trade, and imports and exports will probably have new origins and destinations. In order to do that, new agreements and protocols between countries should be signed.

Most importantly, the aim of recovering free trade should always be on the table. Services and protected industries should be opened in China for European countries, helping the EU avoid the protectionist path that the US is leading.

The world has changed, and so have the trade and political relationships between countries, especially given the development of e-commerce and logistics. It is likely that China will reaffirm its stance on opening the economy when it hosts the International Import Expo in Shanghai in November to engage in closer economic cooperation with the EU and other countries against protectionism.

Facing frequent hostile moves by the US side, the EU and China need not make any hasty decisions. There will be time to think deeply and plan well.

The author is director with the Mundiver Group and senior consultant with the Yiwu-Spain Foundation. bizopinion@globaltimes.com.cn

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