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TRADE WARS
EU seeks US trade detente after China reprieve
By Alex PIGMAN
Brussels (AFP) May 22, 2018

New Washington-Beijing trade 'consensus' resolves little: analysts
Washington (AFP) May 21, 2018 - The compromise reached over the weekend between Washington and Beijing has reduced the threat of a trade war, but the Americans won few concessions from the Chinese side, with key disagreements far from being resolved.

Both sides said Saturday they were committed to reducing the soaring US trade deficit with China, one of President Donald Trump's central demands. To get there, China will "significantly" increase purchases of American goods and services and open its domestic markets wider.

Top White House economic advisor Larry Kudlow called the results a "big step."

"These are sort of like peace treaties in a sense," he told CNBC, adding that "the fine print, the details will come later."

Just days earlier, stock markets had been on tenterhooks at the possible approach of a trade war that could stymie global economic growth.

"It is striking that two rounds of intensive negotiations have resulted in at best a temporary truce, while the fundamental differences on trade and other economic issues remain unresolved," said Eswar Prasad, a professor of trade policy at Cornell University.

Edward Alden, a trade expert at the Council on Foreign Relations, agreed.

"I think this is at best a very preliminary agreement," he said.

Both said President Donald Trump's administration appeared ready to declare victory because the Chinese had acknowledged the need to reduce the US goods deficit with China, which stood at more than $375 billion in 2017.

However, analysts pointed Monday to the glaring lack of details and dollar amounts.

In sum, according to Alden, Team Trump won a "vague Chinese commitment" to buy more American goods and services.

Louis Kuijs, chief Asia economist at Oxford Economics, likewise wrote in a research note that the Chinese had not succumbed to US pressure to agree to cut trade deficit by $200 billion, a demand he called "practically almost impossible."

- North Korea -

After announcing tariffs of 25 percent on steel and 10 percent on aluminum in March, Trump raised the ante repeatedly in the following weeks, threatening tariffs on as much as $150 billion worth of Chinese imports.

For years, Trump has denounced the trade imbalance with China, calling it a threat to US workers and businesses. He has called on China to end allegedly unfair trade practices, in particular the forced transfer, or "theft," of technology and know-how that American companies say the can suffer as a condition of doing business in China.

Observers said that on these points Saturday's White House statement was vague and general. Kuijs of Oxford Economics pointed out that the statement made no reference to China's industrial and technology policies, which are "highly controversial in the US (and elsewhere)."

If the Trump administration gets no further than Saturday's commitments from Beijing, "then this is a huge failure of the Trump administration," said Alden, who noted the discord between reality and the tweets that Trump posted Monday morning.

"China has agreed to buy massive amounts of ADDITIONAL farm/agricultural products," the president tweeted.

Alden said it was "ridiculous and absurd" to point to possible increases in US agricultural exports to China as a major victory. This was never the problem, he said. Technologies and the direction of technological development were, he said.

Alden said the "consensus" announced Saturday should be viewed in light of the possible June 12 summit with North Korean leader Kim Jong Un. China is Pyongyang's principal ally.

"I do think the upcoming summit is a factor. Chinese cooperation is very important to any successful outcome in North Korea," he said. "So I think there is a desire not to escalate the trade conflict in advance of this summit."

EU ministers Tuesday will refine a last-ditch bid to persuade US President Donald Trump to back off stiff tariffs on metals imports from Europe and win the bloc a similar break as handed China.

Europe was hit by the shock tariffs in March, part of the protectionist president's threat of an "America First" trade war with Washington's closest partners, including Canada, Mexico and Japan.

The European Union has said it refuses all trade talks with the United States unless Washington grants a permanent exemption from the painful steel and aluminium tariffs that are set to kick in on June 1.

However, trade ministers from the bloc's 28 member states will discuss a plan laid out by EU leaders for a limited EU-US trade deal as well as opening up the European market to US natural gas -- if the exemption is granted.

"The EU is ready to talk about trade liberalisation with our American friends but only if the US decides an unlimited exemption from steel and aluminium tariffs," EU President Donald Tusk told reporters after the conclusion of a summit in Sofia on Thursday.

The ministers will take encouragement from the US-China development on Sunday with Washington and Beijing backing off from tit-for-tat tariffs after reaching an as-yet specified accord on slashing the massive American trade deficit with China.

Europe's incentives come with a threat to retaliate against the US with European tariffs on American imports, including iconic items such as Harley-Davidson motorbikes and bourbon whiskey.

These counter-measures will officially become enforceable on June 20, but Europeans have committed to not use them as long as talks with the US are ongoing.

Trump announced the duties of 25 percent on imported steel and 10 percent on aluminium in March, but has twice accepted to suspend their effect as talks with key allies continued.

EU Trade Commissioner Cecilia Malmstrom, who handles trade negotiations on behalf of the bloc, has held a series of talks with US Commerce Secretary Wilbur Ross, a stalwart of Trump's hardball tactics.

"My impression is that there will be a permanent decision in one direction or another," Malmstrom told German weekly Der Spiegel.

- 'Deepen relations' -

Any attempt to negotiate a trade deal, no matter how small, requires a mandate from member states, which the ministers are expected to discuss over lunch on Tuesday.

The "limited" deal would focus in particular on cars, a strategic sector that Trump has brought sharp attention to in several tweets that specifically targeted Germany -- an auto powerhouse on its own.

US cars sold in the EU are slapped with 10 percent tariffs, while Washington imposes 25 percent duties on European pick-ups and trucks.

However, customs duties between the two blocs remain low overall, at an average of three percent.

Export powerhouse Germany is very much in favour of getting a deal while France is more reticent in the face of the US pressure tactics.

Whatever the case, EU leaders insist that there is no chance of relaunching the very unpopular TTIP talks, the major EU-US trade agreement torpedoed by Trump when he entered office last year.

At the request of the United States, Europeans are also ready to "deepen relations" in energy matters, in particular in the field of liquefied natural gas.

As a result of the shale gas boom, the US is avidly seeking new export markets and wants to compete with Russia and Norway, the EU's current main gas suppliers.

Developing LNG, which is transported by ship and is more expensive than pipelines, would require reducing existing barriers between the EU and US.

"We have an interest in diversifying our sources of supply," a European source said.

Europe has also raised the possibility of backing a drive to reform the World Trade Organization, the international trade watchdog that Trump accuses of being soft on China and harmful to US interests.


Related Links
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The United States will re-establish sanctions against Iran progressively, kicking off with the automobile and civil aviation sectors, a source close to the French government said on Tuesday. Energy and finance will follow, with companies facing punishment if they continue to do business with Iran, after US President Donald Trump withdrew from a landmark nuclear deal with Tehran. August 6 will see the re-introduction of auto and civil aviation sanctions, according to the source. Sanctions in ... read more

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