Experts Warn of Costs of Uncoordinated Trade Policy Between US and EU
Lack of coordination between the U.S. and the EU on trade policy will make it tougher to confront the economic threat posed by China, experts warned at a conference co-hosted by the Peterson Institute for International Economics.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
“Without allies, the U.S. approach to China, which revolves around tariffs and technology restrictions, cannot work,” said Jeffrey Anderson, a professor at Georgetown University’s School of Foreign Service. “The U.S. is going to need allies, whether the current administration realizes that or not.”
He said that the EU must find a way to work with allied countries to mend the international order if the U.S. would not. “The EU should work with like-minded partners within the U.S. alliance network to begin reform of the rules-based system [to] ... limit Chinese exports of strategic products and also guide Chinese investment and tech transfers.”
Anderson quipped that the situation reminded him of “when the matriarch or patriarch of a family is suffering from mental illness or substance abuse, and everyone comes together to help pull them back in,” alluding to the Trump administration’s reluctance to engage with the World Trade Organization and the “rules-based” economic order that the U.S. has previously championed.
When asked by Anderson how the strategy he outlined might play out, and whether the EU should just “wait out the next four years of Trump,” Mary Lovely, a senior fellow at PIIE, said that economic realities would force a wake-up call. "What does the U.S. auto industry look like if the U.S. goes a very different route than the rest of the world, including Europe?" she asked, going on to say that if the rest of the world transitions to electric vehicles while the U.S. has propped up the internal combustion engine automobile industry through subsidies and tariffs, then it will lose its export base.
Even if the U.S. does not, "the rest of the world will move forward," she warned, and the U.S. must work with the EU to develop a trade strategy through careful tariffs and subsidies to combat the "overcapacity" of Chinese goods.
Chad Bown, a senior fellow at PIIE, warned of the risks of allowing China to achieve market dominance in U.S. or EU industries should there not be trade policy coordination. China has market value dominance over components for items produced in the EU and the U.S. so it has “the ability to weaponize export restrictions once you have Chinese subsidiaries operating in that market [which] could also end up distorting economic activity." The EU doesn't currently have a policy instrument to tackle that threat, and needs to work with the U.S. to develop strategies to counter Chinese economic tools like foreign direct investment and subsidies.