Europe’s ‘Czar of Trade’ goes on a thin line between the US and China

For the most senior European official on economic and trade issues, the main issue on the agenda in the past year has been the cancellation of damages that have occurred. Now the agenda is moving towards rebuilding, which will probably be more difficult.

Shortly after EU Vice President Vladis Dombrovskis took office in 2019, the bloc’s economy was hit by the Corona virus. When he added the subject of trade to his field of occupation in October 2020, trade relations on both sides of the Atlantic were at an unprecedented low point since the days of World War II.

Today, businessmen and politicians on both sides of the ocean are talking about more commercial relations with optimism, and a huge EU financial aid package is being delivered to EU member states.

The polite and quiet Dombrowski, a former Latvian prime minister, has been praised for his role on both fronts.

At the US-EU summit in Brussels in June, when Dombrowskis and US Trade Representative Catherine Tai announced they would end a bitter quarrel over subsidies to aircraft manufacturers Airbus and Boeing, US President Joe Biden was so pleased with the progress he made that Joabsk laughed With him back to Washington to resolve some matters.

In October, Ty and Dombrowski said they would end a dispute over U.S. tariffs on steel and aluminum imposed by former President Donald Trump. The two met several times in the fall to discuss various issues, including a revision of tax laws and a revival of the World Trade Organization, which has been abandoned in recent years.

The past year has been “a very important year for repairing trade relations between the United States and the European Union, which were damaged during the Trump administration,” Dombrowski said.

“What we did, it can be said broadly, met expectations,” he said, adding that there were high hopes for a reset of the relationship with Biden taking office. He added that major challenges remained. “Clearly, there are many issues we need to work on.”

Still, the very retreat from a state of mutual bitterness is presented as progress in the transatlantic business community.

“We are in a very different place compared to a year ago”

“There really was positive momentum coming out of the summit last June,” said Susan Danger, director of the U.S. Chamber of Commerce in the European Union. Despite disputes a few weeks later over the U.S. withdrawal from Afghanistan and a controversial deal to sell American submarines to Australia, she said “we are in a very different place from a year ago”.

A big headache this year will come from the attempt to fix the World Trade Organization, whose meeting scheduled for December was postponed to March because of the corona virus. Many of the 164 member states say the World Trade Organization needs to update its rules, written in the 1990s, and never foresaw the digital economy or the existence of a country like China with the mixture of capitalism alongside an authoritarian government. The World Trade Organization has conducted only part of its day-to-day work since the Trump administration blocked the appointment of judges to one of the vital panels in the international body.

In October, Ty said she was optimistic about repairing the World Trade Organization and that frequent face-to-face meetings she had with Dombrowskis during the fall “continued to build on the very positive working relationship I have” with him. “I hope he is not tired of me,” she joked about the frequency of their meetings.

But despite improving relations and a ceasefire on the trade dispute, “we have not really solved any problem,” said Frederick Erickson, director of the European Center for International Political Economy, a research institute from Brussels. Both sides have devoted themselves in recent years to resolving disputes over aviation and tariffs imposed on metals, issues that have also been linked to complicated domestic issues in both economies. The aspirations for the renewal of the World Trade Organization are modest, given the challenge involved in reaching a consensus, Erickson said.

“There is no doubt that the World Trade Organization is in crisis”

“There is no doubt that the World Trade Organization is in crisis,” Dombrowski said. He said she hoped to ease the crisis because “we see a willingness on the part of the United States to get involved.”

While the old conflicts are still painful, Dombrowski hopes that in the future disagreements can be avoided through a new transatlantic forum, the US Trade and Technology Council and the European Union. Regulation of artificial intelligence and cooperation on a new set of standards for various industries.

The council is received with cautious optimism in Brussels and Washington as a body that may become an institution that will survive beyond the current administration and allow both sides to discuss new challenges as questions arise and their nature becomes clear.

“It provides an ongoing forum for involvement on these issues,” said Maria Demaracis, deputy director of Bruegel, a research institute in Belgium.

Dombrovskis said the 10 working groups in the council and their subgroups would meet earlier this year to look for goals that could be presented at a next high-level meeting, which has so far been set indefinitely for spring, in France.

Other initiatives involving Dombrowski may cause friction with the US and other countries, particularly China. They aim to integrate the economic power of the 27 countries in the bloc and better control countries’ access to its rich market, which has nearly 450 million consumers.

Dombrovskis and his colleague at the European Council, the EU executive, tighten the rules to prevent companies receiving government support from non-EU countries from buying European companies or competing against them on certain EU contracts.

The bloc of countries is also approaching an agreement on rules for international procurement that will allow the EU to reject companies from countries that exclude European companies from their government contracts. This device is likely to affect China but may also hurt the US, where “buy American” procurement rules often leave European companies bidding on tenders at a disadvantage.

“We are also willing to act autonomously, if we have to”

In December, Dombrovskis unveiled another anti-coercion device that would allow the council to impose tariffs and block exports from countries that use economic arm bends against the EU, such as boycotts, border checks or security checks. This proposal will take months, if not years, to pass and be implemented.

Together, these measures “will allow us to act in a more autonomous way, when needed,” by activating the economic muscle of the bloc of states, Dombervsky said. “We are committed to multilateralism but we are also willing to act autonomously, if we become obligated.”

Many observers doubt this and say that even if the EU adopts the proposed measures, reaching an internal agreement between the bloc countries to use these tools against powerful countries will not be easy because there are conflicting priorities between the bloc countries and themselves.

Analysts point out that in December, China actually banned all imports from the tiny country in the EU from Lithuania because of its support for Taiwan, which China considers a province that has rebelled against the country. The pale response of the Council – which manages foreign trade for all EU countries – has been recorded in many places as a new demonstration of the difficulty of the bloc of countries in responding uniformly and powerfully to external pressures.

Dombrovskis said the council was following developments closely, trying to understand the facts and “go through the diplomatic and political channels to resolve this issue”. Reports that products from other European countries containing components from Lithuania are also rejected by Chinese customs officials are disturbing, he said.

“We recognize the complexity of our relations with China,” Dombrowski said, noting that the EU sees China as a partner in the war on climate change, a competitor to trade and a systemic rival when it comes to the economy and governance model.

“We need to navigate this very complex relationship, given that China is the second largest economy in the world,” Dombrowski said.

By Editor

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