Good morning.
The United States and the EU may have spent much of the past year in a bruising trade battle, culminating in an agreement that MEPs will sign off this week, but their officials are marching in lockstep ahead of the World Trade Organization’s bi-annual ministerial summit in Cameroon.
They both want the WTO’s Most Favoured Nation (MFN) principle to be re-opened and reformed.
The MFN principle is based on equal treatment in trade terms between countries. The Trump administration’s position reflects a view that trade is a zero-sum game where the most powerful – like the US – should dictate the terms and has basically declared war on the traditional concept of free trade.
EU officials have repeatedly stressed over the past two years that they are committed to the so-called ‘rules-based order’. Yet the EU’s trade commissioner Maroš Šefčovič has given his support for reforming MFN.
In truth, the EU’s ire is aimed at China, who Brussels accuses of subsidising a wide range of industries and drafting its rules on procurement and exports of rare earths, to take a couple of examples, to shut out foreign companies. Those complaints are at the heart of Brussels’ multi-sector trade dispute with China that also covers excess supply in the electric vehicle and steel sectors.
The question is whether the EU should position itself alongside the US on WTO reform when their positions are so different. Commission president Ursula von der Leyen is currently in Australia hoping to shake hands on a free trade deal, part of the EU’s agenda to diversify the bloc’s trade relationships.
But for one thing, there are several hundred other countries apart from China. Developing and middle-income countries in southern Asia, Latin America and Africa, for the most part, want to do more and cheaper trade with Europe. But if the EU indicates that it and the US view them with hostility or indifference, they will shift their attention elsewhere. After Trump’s so-called ‘Liberation Day’ tariffs last April, China responded quickly by offering tariff and quota-free trade to Africa’s 54 countries.
If the EU is serious about the ‘rules-based order’ it should start by not undermining one of its bastions.
Ben Fox, trade and geopolitics editor
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