LP Brussels
Food for thought: a geopolitical  defence of EU-US trade

Food for thought: a geopolitical defence of EU-US trade

The European Commission recently adopted two long-awaited proposals for negotiating directives for EU-US trade talks to begin. These directives contain one on conformity assessment, with a very limited scope, and one on the elimination of tariffs for industrial goods. Some will naturally ask: is this the comeback of the much maligned TTIP? Are we saying Donald Trump making a u-turn on free trade? No, and no. These new trade talks, which the EU is keen to emphasise are for a limited trade agreement, stem from Joint EU-US Statement that came out of Juncker and Trump’s White House meeting in July 2018.

Many of us will distinctly remember the vocal opposition to TTIP and US standards that led to the whole plan being ditched. What we are seeing here is not the comeback of TTIP but rather a broken-down series of mini TTIPs, something that has been suggested in the past. With the highly controversial TTIP agreement being indefinitely shelved, why are these new trade talks different? Well, for starters, this is a very narrow scope that includes the removal of tariffs on industrial goods and looking at a limited number of non-tariff barriers through a conformity assessment.

People will ask: what is the point of two seemingly irreconcilable markets trying to hammer out a limited trade agreement? The answer may go deeper than the hefty economic benefits that would follow the EU and US further decreasing tariff and non-tariff barriers between each other. One underrated consideration behind the US and EU keeping trade talks on life support, which these limited talks would do, is the geopolitical dimension of EU-US trade discussions. Not to borrow too heavily from Donald Trump, but despite recent trade tensions, the main threat to the US and EU in the trading global order remains China and its continuing rise to power as a global trading force to be reckoned with.

Since 2013, China has been undertaking its massive One Belt, One Road project, played a key role in the proposed Regional Comprehensive Economic Partnership trade agreement (RCEP), and pushed the China-led Free Trade Area of the Asia-Pacific (FTAAP). These moves, tied in with the stagnating Doha Round negotiations at the WTO have led to a free-for-all among the world’s leading trade powers to stamp their authority on trade rules and standards. As Commissioner Malmstrom said this month in Washington DC in a speech at the Atlantic Council, “International trade
without the WTO would be anarchic. Countries would be bullied, companies would fall victim to unfair practices – there would be no reliability, no stability. So we need to repair and stand up for the system.”

China has acted to inject momentum into international trade, on its terms through trade agreements that represent a Chinese take on trading rules and standards. There is a case to be made that this is an unsubstantiated fear, after all some have argued this represents an example of a Thucydides trap where misunderstandings over a rising power’s intentions can in itself make conflict inevitable by creating a self-fulfilling prophecy. Many have argued that making China out to be the enemy to the international trade order, removing the possibility of cooperation, will end up turning it into what the US and the EU fear it could become: an upending influence on the existing trading system.

The big question that will face these new rounds of trade talks is the same that faced the TTIP negotiations: can two competing markets put aside their historical trade red lines to agree on a trade agreement, however limited, that will breathe new life into their influence as trading powers? Although this particular round of talks will not make a significant impact on this, could they prove to be the catalyst for future, and possibly deeper, negotiations? For now, keeping open the channels of engagement is the most important thing this round of talks will accomplish.

Photo: AFP via Getty images

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