07.10.2022

Europe is preparing for the “trade apocalypse”

European officials are struggling to save the WTO, which runs the risk of ceasing to exist due to the aggressive trade policy of US President Donald Trump.

A note drawn up by the European Commission has spread among the EU’s leadership that states that the US is deliberately working to demolish the world’s existing trade order and that it is warning of an upcoming “trade apocalypse”.

If this document has any weight, then the “trade war” is about to worsen, although it would seem that it might be worse than Trump’s threats voiced last week to impose a 20% duty on importing cars into the United States.

According to Bloomberg, an EU note says that “a rules-based international trade system” could return to a state in which “the strong impose their will on the weak.” The world will return “to a trading environment in which rules will be respected only where it is profitable and where the laws of trade relations are dictated by the one who is stronger.”

The lamentations about returning to “mercantilist deals” became more frequent after President Trump decided to reduce the US trade deficit at any cost, even if this price is the destruction of the multilateral trade order.

The EU Note outlines three claims:

• gaps in international trade law, “leading to problems caused by the non-market policies of the main players and which the WTO does not seem to be able to adequately address”;

• aggressive actions by the United States and the introduction of “punitive” duties aimed at the same time against allies and opponents;

• US decision to block appointments of members to the WTO Dispute Resolution Body, which is the main arbiter in trade disagreements.

In a separate paragraph, the European Union complained about US practice blocking appointments to the WTO appeals body, which could rule in trade disputes.

“As members of the appeals body leave their posts and new appointments are blocked, the dispute settlement system will soon be paralyzed, the implementation of the rules will become impossible,” the commission’s statement was circulated on the eve of the EU leaders ’summit to discuss trade issues, among other things. “For global economic governance, this will be a step 20 years ago.”

This week, the European Commission will have the opportunity to voice its claims: the leaders of the largest trade bloc in the world will come together to adopt a “full-fledged approach to jointly establishing the work of the WTO in critical areas”.

It is unclear whether the US will heed any suggestions from Europeans, but this morning, Moody’s gave the White House an extra reason to think about it. The imposition of tariffs in the amount of 25% will negatively affect the global automotive industry. Before harming foreign competitors, duties will put pressure on US firms such as Ford and GM. Of the European automakers, Jaguar Land Rover and Volvo will be hit harder.

Leave a Reply

Your email address will not be published.