Trade policy may remain unchanged without Trump

WHEN China joined the World Trade Organisation (WTO) in 2001, it was still a developing country. More than 15 years later, its circumstances have changed and China has turned into the world’s second-largest economy.

The WTO has served not to discipline China, which is what US President Donald Trump (and to some extent the EU, albeit more discreetly) now seeks, but to give it a global thrust.

Trump wants to stop China overtaking the US technologically. Underlying the trade war unleashed by the US president is a clash of perceptions. It is said that Trump sees China as a wealthy country with many poor people, whereas China sees itself as a poor country with many wealthy people.

European dimension This clash of perceptions extends beyond the US-China dimension. The Trump administration views Europe as a group of wealthy countries that the US defends at its own expense. This is why it is asking the Europeans to spend more on their defence, with the mercantilist catch that they buy US weaponry.

The Trump administration also views Europe through the prism of Germany, even though that country’s trade surplus is first and foremost a concern for Germany’s partners in the EU.

US tariff increases are primarily aimed at Germany, with the Sword of Damocles hanging over the automotive industry. Beyond Europe and China, the Trump administration perceives the North American Free Trade Agreement with Canada and Mexico not only as outmoded (it is, having been signed in 1988), but also as having benefited its two partners more than the US.

The Europeans, meanwhile, tend to view Trump more as a cause than a symptom of what’s going on. This yields yet another clash of perceptions that makes it more difficult to find solutions.

From the EU’s perspective, it should not be assumed that, even if Trump were to lose the next presidential election in 2020, US trade policy will change substantially.

Not just the Republicans It is important to remember that the Democrats do not embrace free trade with any great enthusiasm either. In fact, politically they have been the stronger defenders of the victims of free trade.

According to data published by the Círculo de Empresarios, the main countries with which the US runs a trade deficit are China (47.1 percent of the total), Mexico (8.9 percent), Japan (8.6 percent), Germany (8.1 percent) and Vietnam (4.8 percent). With the EU as a whole, the figure is 19 percent.

However, the statistics tend to reflect an outdated model. Digital transactions do not appear in many accounts, nor does a growing and crucial component of such transactions, namely the trade in data, which is not covered by the WTO. The rules applied to offline trade are not the same as those applied online.

The Trump administration has used national security as the pretext for its protectionism. But what does national security have to do with, for instance, importing cars (or olives) in peacetime?

As the German foreign minister, Heiko Maas, likes to point out with more than a hint of irony, US streets and freeways “are more secure with German cars”.

Deadlocked WTO Moreover, Trump has deliberately deadlocked the WTO, where trade disputes are supposed to be settled. For the past year, his administration has vetoed all judicial appointments to the organisation’s seven-member appeals chamber, which is charged with resolving trade quarrels.

Adapted from Andres Ortega’s Global Spectator column, which he writes for the Elcano Royal Institute.

Ortega is a senior research fellow at the Elcano Royal Institute, a major Spanish foreign affairs think tank.