U.S. / EU Trade Relations with China: Different Challenges, Common Answers?

May 29, 2013

On May 29, 2013, the AGI Business & Economics Program hosted a discussion on “U.S. / EU Trade Relations with China: Different Challenges, Common Answers?” with AGI/DAAD Fellow Tilman Krueger. The discussion highlighted the differences and similarities in approaches to trade with China, and concluded in a discussion about a possible convergence of economic policies between the U.S. and EU. With regard to the establishment of Transatlantic Trade and Investment Partnership (TTIP), the audience pointed toward possible foreign policy risks derived from issues such as its exclusiveness and lack of transparency while also highlighting its potential as a platform for free trade and further communication. Most participants contended that differing national interests complicate the convergence of economic policies on the broader scale and will require appropriate platforms for dialogue.

The presentation built upon the question of whether U.S. and EU trade policies toward China are converging. The U.S. and EU both extensively engage in trade with China but approach this trade relationship differently. In the U.S., the consideration of traditional non-trade issues such as foreign and security policy politicizes the trade relationship with China. The formulation of a nation-wide opinion on U.S.-China relations affects the decision-making of the president and his administration. Since the EU has lacked this politicization, it has put more emphasis on traditional trade issues such as currency manipulation or violations of intellectual property rights. While the American strategy can be characterized by the term “escalate to protect,” the EU has engaged in a “compromise to grow,” with the Commission being in favor of free trade policies.

Despite the differing approaches to trade policy, the simultaneous increase in cases filed against China within the World Trade Organization (WTO) indicates a trend of collaboration between the U.S. and the EU. While the EU has filed only a few complaints in past years, the recent drastic increase implies its adaptation of the U.S. approach: it has become more aggressive and has utilized stronger defense instruments. Consequently, the common goal of the U.S. and the EU to move China toward becoming a market economy is the context in which debates over the TTIP have evolved. Its establishment could be both beneficial and disadvantageous: it would strengthen transatlantic cooperation on the one hand but could set the basis for protectionist strategies on the other.

The discussion commenced with the possibility of interpreting the TTIP as a transatlantic bulwark against China. While the U.S. and the EU proclaim it as an opportunity to find a common ground on major economic policies, it would simultaneously imply the establishment of common standards applying to the rest of the world, especially newly developed countries. Both the U.S. and the EU have brought complaints to the WTO. The audience interpreted the almost simultaneous filing of these cases as an attempt to strengthen the EU/U.S. position toward China, a strategy that could be facilitated through the TTIP. While the TTIP standards could imply exclusiveness on the one hand, they could also facilitate entry into a broader market as they apply to a larger block of companies and countries.

In the context of converging economic policies through common standards, the discussion consequently moved toward the issue of transparency and friction within the U.S./Chinese and EU/Chinese trade relationships. While it was discussed that the TTIP would help transform China into a free market economy and therefore increase its legal accountability within the WTO, it was argued that the establishment of the TTIP would contradict the principle of transparency, one of the major values of the WTO. This lack of transparency creates the major point of friction, hindering China to foresee possible benefits from the partnership.

As a conclusion, the audience contended that the establishment of a partnership over issues as broad as trade relations and economic policies will face a number of difficulties. In the climate and energy realm, for instance, the nations will struggle to find a common ground. More specific sectors such as the international trade of metal, however, provide some hope for the partnership to work. Collaboration should therefore focus on these specific sectors and issues rather than tackling broader issues in trade policy. Yet, transatlantic collaboration in any certain field will require a common platform to discuss these issues.