The end of policy consensus on free trade

KIMIMASA MAYAMA

Workers prepare containers for loading at Aomi International Container Terminal, a port for import and export, in Tokyo, Japan, 25 January 2017. The Japanese Finance Ministry announced on 25 January that Japan recorded its first trade surplus in recent six years in 2016.

China is not necessarily Europe’s answer to the American challenge


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“A trade war would neither be in Europe’s nor the USA’s interests,” European Commission, Jean-Claude Juncker told Bild am Sonntag.

The President of the European Commission also said that Trump’s signals of an impending trade war should be taken seriously.

No policy consensus on free trade and climate change

On Saturday, the G20 Summit in Baden-Baden, the 20 biggest economies in the world failed to form a consensus on a customary joint statement that would commit to resisting protectionism, support free trade, and the funding of policies to stop climate change.

US President Donald Trump is proposing the introduction of an import tax for manufactured goods while penalizing US companies producing abroad.

In Baden-Baden, the US delegation made clear that a common statement similar to the one issued in 2016 was no longer “relevant.” The one issue the G20 did agree on was fighting tax avoidance, besides taking steps to disrupt terrorist financing.

President Trump has already criticized Germany’s and China’s trade surpluses.

“America First”

While the America First policy has prioritized a withdrawal from the Pacific free trade agreement and disrupting manufacturing ties with Mexico and NAFTA, the fear is that a trade war with Europe is also possible.

Washington is hinting at the “reinterpretation” World Trade Organization (WTO) rules, undermining multilateral trade. “… There are parts of the WTO that are not being enforced and {the administration} will look to aggressively enforce things in the interest of American workers,” US Treasury Secretary, Steve Munchin, said on Saturday.

45% of the EU’s GDP depends on exports, and the implications of a trade war are considerable. Germany’s foreign minister, Sigmar Gabriel, has proposed a refocus to export markets in Asia. In February, Reuters reported on plans for an April or May Summit between the EU and China to address concerns on protectionism.

However, China is introducing its own brand of protectionist or “import substitution” policies in strategic industries, such as transportation, robotics, and renewable energy. The “Made in China 2025” initiative has been criticized by Washington as a form of mercantilism and a direct threat to the global trading system.

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