Coordination on China for US, EU Difficult to Achieve, Observers Say
European professors speaking about the future of the trans-Atlantic trade relationship said that while it's logical for democratic, rule-of-law countries to coordinate trade policy against an authoritarian rival, that's easier said than done.
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Professor Karl-Heinz Paqué, chairman of the board of Germany's Friedrich Naumann Foundation, told the audience for an April 13 Washington International Trade Association webinar that the realization that China is a threat, not just a rich market opportunity, is slowly dawning on the German political establishment. He said that while close cooperation with the U.S. is critical in reducing the national security threat from China's quest for technological domination, “it’s going to take years to mature into a cooperation which will really be effective in keeping China at bay.”
He said that with subsidization of state-owned enterprises, Chinese officials are massively violating the World Trade Organization rules: “Who can bring them back to the rules?” He said that North America, combined with Europe, has the economic clout to do so.
The U.S. Chamber of Commerce's senior vice president for European Affairs believes that these kinds of initiatives cannot be achieved until he U.S. and the European Union resolve their bilateral trade tensions. One of those tensions arose out of industrial subsidies to Boeing and to Airbus. “We need to get Large Civil Aircraft resolved,” Marjorie Chorlins said, referring to the official name of the WTO case. “I do think there is will on the part of both sides to find a way to do that.” She said there are conversations between the U.S. and Brussels now. “Can they come up with a mutually acceptable way to manage subsidies to the sector?”
She said it's also critical for the U.S. to lift its Section 232 tariffs on Europe, which would lead to the removal of European countermeasures. There's the threat of those countermeasures doubling in June, and Chorlins said that needs to be avoided. She said there are ways to support the U.S. steel industry short of tariffs.
Kotryna Tamoseviciene, acting head of the economics department at the central Bank of Lithuania, said that despite some differences between the U.S. and the EU, they need to remember that what values they share are more important.
Chorlins also addressed the trade tension that's a result of Austria, France and the United Kingdom adopting digital services taxes. “They clearly target American companies, and so they’re discriminatory,” she said. There's a robust process of negotiation on international taxation at the Organization for Economic Cooperation and Development, she said, but she's concerned that even if the OECD reaches an agreement, some European countries will want to keep a DST because of the need for more revenues to recover from the pandemic.