LONDON CORRESPONDENT: Donald Trump’s foes must lower their aim to bring down their target. Extravagant criticism only helps him to look like a winner.
When Trump imposed tariffs on steel and aluminium imports a bare two months ago, some serious people thought it presaged a breakdown in world trade, a new global depression or even worse.
The President’s latest demonstration of the art of the deal came in Washington last week when he struck a bargain with Jean-Claude Juncker, the President of the European Commission. Trump has agreed to hold fire on fresh tariffs on European (read German) car imports; the EU has just changed its environmental regulations to let it import lots more soya beans (helpful for Trump in the US farm states as China targeted these crops in its trade retaliation measures) and plans to import more US liquefied natural gas.
The tariffs introduced by the US administration (and the EU’s retaliatory tariffs) will remain in place while the parties negotiate their removal as part of a much wider negotiation, which will work towards –
- The elimination of tariffs, subsidies and non-tariff barriers on industrial goods (excluding cars),
- Boosting trade in services, and
- Reforming the World Trade Organisation (hint – restrain China).
Talk is cheap, of course, and the EU has a formidable reputation for talking. Hence there is a long way to go before this becomes the triumph for free and fair trade proclaimed by Trump.
But it wrong-foots, at least temporarily, those who had decided he was a committed protectionist (perhaps they are learning the unwisdom of assuming commitments to anything). The New York Times was more acute in pointing out that the negotiations are likely to traverse the ground which would have been covered in former President Obama’s proposed Trans-Atlantic Trade and Investment Partnership, or TTIP.
So has nothing actually changed?
This might be the conclusion drawn by readers of our earlier post which observed that modern trade agreements are mostly about managing the growing regulatory burden for the benefit of politically-connected incumbents.
But on the strength of the latest deal it is also possible that Trump may be more able to get concessions from Europe than his predecessor. His threat of auto tariffs is said to have rattled the German government and there is little sign of smirking or triumphal press briefings from the European side.
The least-reported aspect of the deal in some ways is the most pregnant with possibility. Larry Kudlow, the director of the administration’s National Economic Council, is saying that the EU will help the US hold China accountable for unfair trade practices and intellectual property theft.
If one regards China-US trade as part of a wider political conflict and US trade policy as part of an attack on both China’s state-capitalist model and its geopolitical pretensions, then such an agreement would only increase what some see as China’s vulnerability (for more on that, see this piece by Claremont McKenna College professor Minxin Pei in the Nikkei Asian Review).
Meanwhile in the UK, there is talk that a European deal puts Britain at the back of the queue for a US trade deal. Technically this must be so, as Britain isn’t allowed to negotiate until it actually leaves the EU. But this argument forgets the incentives.
Both Trump and Theresa May (or her successor as Prime Minister, the way things are looking) would benefit enormously from such an agreement, giving the British tangible compensation for a possibly-hard Brexit and the Americans a further demonstration of Trump prowess.
Bullying can work if your opponents need something or just want a quiet life. But it won’t work once they decide that it won’t stop, and they might as well fight.
Theresa May – take note. And expect some interesting negotiations with the EU.