While Pushing For Free Trade, EU Promises Tough Line On U.S. And China

While EU leaders agreed to consider screening investments by state-owned Chinese firms, Europe would react in kind if the United States did not play fair in trade, German Chancellor Angela Merkel warned U.S. President Donald Trump on Friday.

The European Commission should look into ways to increase reciprocity in government procurement and investment, the 28 EU leaders signed up to a document saying that.

“Reciprocity is the right way. If we have for example access to public contracts in the United States, then we can say ‘yes’ to access to public contracts in Europe,” Merkel said, but if full access was denied then Europe would “need an answer”.

Saying that they would return to the issue at a future meeting, the leaders called on the Commission to analyze foreign investments in strategic sectors.

While both were in the background of its “free and fair” trade push, no mention of the bloc’s two largest trading partners, the United States or China, was made in the written conclusions to the European Union summit that ended on Friday.

The 28-nation union now sees itself as an open markets counterweight to a country whose President Donald Trump is looking at restricting steel and aluminum imports after it tried for three years to forge a trade alliance with the United States.

With limits on foreign takeovers in areas such as energy, banking and technology, where China seeks Europe’s know-how, the “protection agenda” of new French President Emmanuel Macron, described as an embrace of free trade, also now includes Beijing.

Disagreements over trade and over-production of steel overshadowed an EU-China summit earlier this month, designed to show the two as allies in climate change after the U.S. withdrawal from the Paris accord.

“Fair competition is better than the law of the jungle,” Macron told a news conference alongside German Chancellor Angela Merkel.

Partly because European companies are denied similar access in China, France, Germany and Italy have backed the idea of allowing the EU to block Chinese investments.

While smaller eastern and southern European economies that are dependent on Chinese investment have rejected steps against Beijing, more pro-trade countries such as Sweden have said this is a step down the path of protectionism.

In order to ensure that public infrastructure or defense firms did not to fall into foreign state-owned hands, it made sense to screen foreign investments, said the new Irish Prime Minister Leo Varadkar.

“The key thing we wanted to avoid was any effort to use this proposal as a Trojan horse for protectionism,” he said.

Encouraging progress in trade negotiations with countries in the Americas and Asia, the EU leaders that trade created growth and jobs.

“I think that a time when protectionism is strongly on agendas, the European Union’s commitment to a free and rule-based trading system is very important,” Merkel said.

With the EU’s chief negotiator in Tokyo seeking a breakthrough that would allow a provisional deal to be signed in early July, the most advanced talks are with Japan. While Tokyo is seeking greater access for cars and car parts, the EU wants Japan to scrap tariffs on cheese and wine.

(Adapted from Reuters)


Categories: Economy & Finance, Geopolitics, Strategy, Sustainability

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