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European Union Finds Leading Fight for Open Trade a Tough Task

Posted by hkarner - 29. Dezember 2017

Date: 28-12-2017
Source: The Wall Street Journal

Bloc faces some headwinds after vow to fill breach on liberalizing trade as Trump pushes ‘America First’

BRUSSELS—The European Union started this year by announcing a global trade offensive to counter rising U.S. protectionism. Now the bloc faces an uphill battle to prove it can deliver.

With U.S. President Donald Trump’s “America First” policies upending the world trading system championed for seven decades by the U.S., the EU was quick to suggest it would assume the mantle of globalization’s standard-bearer.

“Those who, in the 21st century, think that we can become great again by rebuilding borders, reimposing trade barriers…are doomed to fail,” European Trade Commissioner Cecilia Malmström said in January, four days after Mr. Trump’s inauguration. “It is important the EU shows confidence and leadership.”
Almost a year later, Brussels has a mixed record of success on the trade front. While the EU strives to fill the void left by the U.S. as an advocate of trade liberalization, it is also grappling with political divisions among its 28 members and calls for safeguards against China’s rising economic might.

Mexico’s Minister of Economy Ildefonso Guajardo, left, and and European Union Trade Commissioner Cecilia Malmström giving a joint press conference on trade relations on December 21 in Brussels.

Mr. Trump withdrew the U.S. from the 12-country Trans-Pacific Partnership on his first day in office, and soon after froze trade talks with the EU and demanded a renegotiation of the North American Free Trade Agreement with Canada and Mexico.

Brussels responded by extending a hand to all the trading partners the White House shunned.

So far, that has produced an agreement on world’s biggest trade deal, between the EU and Japan. It has also spurred frenzied talks to complete negotiations, or start new ones, with partners from Latin America to Asia.

The EU has also provisionally implemented a deal with Canada that slashed almost all tariffs between the two trading partners.

Brussels, however, fell short on its ambitious agenda of clinching deals this year with Mexico and Mercosur, the South American bloc grouping Argentina, Brazil, Paraguay and Uruguay. A 2014 agreement with Singapore and 2016 deal with Vietnam haven’t yet been implemented, pending debates and approvals from EU governments and the European Parliament.

In the face of U.S. disengagement, the EU and its international partners also failed to achieve objectives such as eliminating subsidies for illegal fishing at a World Trade Organization gathering this month in Buenos Aires.

European Commission President Jean-Claude Juncker, the bloc’s top executive, has made strengthening the EU’s role in global trade his first priority as Washington retrenched.

In September he asked EU governments to approve fast-track negotiations with Australia and New Zealand, seeking to engage two more U.S. trading partners burned by Washington’s exit from the Pacific trade pact.

“Partners across the globe are lining up at our door to conclude trade agreements with us,” Mr. Juncker said. “Europe has always been an attractive place to do business.”

EU governments still haven’t greenlighted Australia and New Zealand talks, and such hesitation has frustrated efforts to get any EU trade pact fully approved.

In 2016 the Belgian region of Wallonia—home to 1% of the EU’s population—almost torpedoed the Canada accord after seven years of talks, mainly over concerns about an investment-dispute settlement system.

Brussels got a green light in May from the EU’s top court to sidestep approval by national parliaments, as long as a trade agreement excludes thorny issues such as investment-dispute settlement. Structuring such deals could allow the EU to clinch the Australia and New Zealand pacts within two years, Mr. Juncker’s stated goal.

Yet EU governments, leery of the populist backlash that fueled Britain’s decision to exit from the bloc and the Wallonia-led resistance to the Canada trade deal, are reluctant to yield more powers to Brussels.

Most European leaders—including strongly pro-EU ones such as French President Emmanuel Macron —want to preserve a national say in trade pacts. Some EU governments also demand safeguards against China, whose mix of state support, acquisitiveness and domestic protection have prompted the EU to bolster its trade defenses and consider screening foreign investments.

Next year will test the EU’s capacity to deliver on its liberal trade principles. Brussels faces a narrowing window of opportunity to shake hands on trade deals before elections in Mexico and Brazil, a Mercosur heavyweight.

Obstacles ahead include pushback from France and Ireland on beef quotas that have previously derailed two-decade-long talks with Mercosur. And with the U.S. considering unilateral action against Chinese trade practices, Brussels will likely lack critical support from Washington in pressuring Beijing to abide by international rules.

“When the EU and the U.S. are not aligned, you have a much more fragmented landscape, with no clear leader, and it’s much harder to drive policy,” said Stephen Adams, a former EU trade official now with U.K.-based advisory firm Global Counsel. “The ambition can leak out of the process very quickly.”

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