China, EU Should Not 'Seek Confrontation': FM Wang

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EU and Germany push for a new World Trade Organization – DW – 07/04/2025

Brussels and Berlin have launched a new initiative aimed at bypassing the long-standing paralysis of the World Trade Organization (WTO) caused by the United States. But how viable is such a solution? A proposal, introduced by European Commission President Ursula von der Leyen and German Chancellor Friedrich Merz, has sparked considerable attention. Speaking at the end of a summit of EU leaders in Brussels on June 27, they floated the idea of the EU taking the lead in forming an alternative to the World Trade Organization (WTO), the world trade body that has been in place since 1995. Merz said the idea was in its early stages but could include mechanisms to resolve disputes, as the WTO was meant to do. "You all know that the WTO doesn't work anymore," he said, adding that a "new kind of trade organization" could gradually replace "what we no longer have with the WTO." The German chancellor was referring to the near-total breakdown of the WTO's dispute resolution mechanism. It was former US President Barack Obama who first blocked appointments to the WTO's Appellate Body — its top court for trade disputes — during his later years in office. That blockade has continued under every US administration since, regardless of party affiliation, as successive governments have opposed WTO rulings that they argue undermine US national interests. As a result, trade disputes can no longer be conclusively resolved once a party appeals. Currently, unresolved cases include disputes between the EU and Indonesia over nickel ore exports, rulings on subsidies for aircraft manufacturers Boeing and Airbus, and anti-dumping cases against China. The EU's von der Leyen emphasized plans for a particularly close partnership with like-minded trade nations in Asia, referencing potential cooperation with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This trade alliance currently includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The United Kingdom has also joined, becoming the first European country in the bloc. But can Europe realistically create a new WTO without US involvement? And how effective would an alliance with like-minded global partners be, especially in the Asia-Pacific? Jürgen Matthes, an international trade policy expert at the Cologne, Germany-based German Economic Institute (IW), expressed support for the initiative in an interview with DW. "A formal EU application to join the CPTPP would be a strategically important move in several respects," Matthes said. "It would send a clear signal to the US that its protectionism is isolating it, while the rest of the world continues to liberalize trade." Matthes also said this would create a "remarkably large trans-regional trade agreement," involving major economies, "with the EU as the largest bloc." "It would cover nearly all continents. And maybe some African countries could be brought on board as well," he added. Such a club, however, would initially exclude China, which Matthes argued is not known for playing by fair competition rules. "The goal is to form a strategic trade alliance that addresses today's pressing issues in global trade — not only US protectionism, but also the massive market distortions caused by China's subsidies, which current WTO rules don't effectively address," said Matthes. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video For the EU, the priority would be to enshrine strict competition rules within the new framework, particularly regarding state-owned enterprises and industrial subsidies. "Anyone who meets those standards can join," he added. That would require China to make major reforms, such as reducing market distortions and subsidies, or finally agreeing to a comprehensive overhaul of WTO rules. Free trade advocates have already created a workaround to the WTO's stalled appeals process called the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). Formed within the WTO itself, MPIA provides an alternative dispute resolution system that functions without US participation. According to the European Commission, 57 countries, representing 57.6% of global trade, have joined the MPIA, including the UK and all EU member states. Still, business groups such as the Federation of German Wholesale, Foreign Trade and Services (BGA), which represents Germany's export sector, are wary of undermining the WTO. Speaking to news agency Reuters, BGA President Dirk Jandura acknowledged the strategic benefits of forming a new framework among functioning democracies via CPTPP, but warned of the risks. "We must not allow global trade to splinter into competing blocs with different rules," he said. "This new organization must only be a transitional solution, clearly aimed at reforming — not replacing — the WTO." Brussels has also been careful to clarify that the goal is not to render the WTO obsolete. EU Commission President von der Leyen described the "structured cooperation" with CPTPP members as a potential starting point for reshaping the WTO. Even the WTO's former chief economist, Ralph Ossa, who recently returned to the University of Zurich, openly acknowledged the need for change. "Does the WTO need reform? Absolutely," he told DW. Germany's economy ministry echoed that view, with a spokesperson for Minister Katharina Reiche confirming that the German government, together with the European Commission, is actively pushing for WTO reforms. These include new rules to curb industrial subsidies to ensure fair competition, digital trade initiatives, and investment facilitation. The EU is already in talks with countries that support open and rules-based trade — including CPTPP members. The EU's dual message to both the US and China appears to be part of a deliberate communication strategy that has evolved since US President Donald Trump's tariff war. Matthes envisions a new alliance under the banner of "Open Markets with Fair Trade." In such a setup, "the US is out when it comes to open markets, and China is out when it comes to fair trade — unless things change under a new US administration or a reformed China emerges." He sees multiple advantages to this strategy. "We'd achieve more trade liberalization and gain access to new markets. We'd isolate the US more and show Trump that protectionism is ultimately a dead end." At the same time, Europe could send a clear message to China that it will no longer tolerate market distortions, he added.

EU-US trade talks: Crunch time looms with no deal in sight – DW – 07/04/2025

DW

an hour ago

DW

EU-US trade talks: Crunch time looms with no deal in sight – DW – 07/04/2025

EU and US negotiators are attempting to finalize a deal on tariffs before an impending deadline on July 9. Experts say a no-deal scenario is possible. July 9 is almost upon us. That's when 50% tariffs could kick in on EU goods sold to the US if the two sides don't strike a deal beforehand. US President Donald Trump hit EU goods with a baseline tariff of 10% on April 2, and a rate of 25% on imported cars and 50% on steel and aluminum. He threatened to ramp the 10% rate up to 50% by April 9, but a stock market selloff prompted by his tariffs led to a postponement. In the meantime, EU and US negotiators have been working to strike an agreement ahead of the looming deadline, amid doubt in European capitals that EU Trade Commissioner Maros Sefcovic will be able to strike a deal that satisfies the member states. European Commission President Ursula von der Leyen told a press conference on Thursday (June 3) that striking a comprehensive trade deal in 90 days was "impossible" but was hopeful of "an agreement in principle", specifically referring to the agreement the US and UK had struck as a model to aim for. Those watching the negotiations closely say there have been sharp divisions among European Union member states over what concessions are acceptable and on what the US side should offer. For example, German Chancellor Friedrich Merz has spoken of the need to strike a deal quickly, criticizing the European Commission's "complicated" approach. "What is at stake here is the rapid resolution of a customs dispute, particularly for our country's key industries," he said. Yet, French President Emmanuel Macron has decried the idea of tariffs being levied by powerful countries as "blackmail", without specifically referring to Trump. Jacob Funk Kirkegaard, from the Peterson Institute for International Economics in Washington D.C., doesn't think the position of the German chancellor will be "acceptable" for all EU members. "Merz has said a number of times that we can live with a 10% across the board tariff. As long as we don't get a 25% sectoral tariff on cars, etc.," he told DW. While the comments of Sefcovic and von der Leyen have been somewhat conciliatory towards Trump and the US, Kirkegaard considers this to be an attempt to maintain unity amongst member states. "That's basically the Commission trying to protect itself against attacks from member states, because it's obviously they would have to bear the consequences of a trade war," he said. If the UK deal is a model, then the EU will likely have to live with 10% tariffs remaining in place on many goods, as the UK has done. The US-UK agreement cut the 25% tariff on UK cars to 10%, but the number of cars that can be imported on that duty is limited to 100,000 — roughly the amount of cars the UK sold to the US in 2024. Any cars exported above that quota will be subject to a 27.5% tax. The EU sold over 700,000 cars to the US last year. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video However, Kirkegaard believes if the steep car, steel and aluminium tariffs remain at the same level, it will hard for many on the EU side to accept. "As long as that's the case, there's not going to be a deal, in my opinion," he said. "It is ultimately not acceptable to the EU, which is an economy roughly comparable in size to the US, for US tariffs to go up and the EU's to not go up." Kirkegaard argues that in a trade confrontation between economies of the same size, tariffs should "go up together and down together." Bill Reinsch, a senior economics adviser with the Washington-based Center for Strategic and International Studies (CSIS), thinks a UK-style agreement is the most likely outcome. However, what is most important for Trump is the perception that he has "won" rather than what has actually been agreed, Reinsch told DW. "What matters for him is the Oval Office meeting, that so-and-so was agreed, and now everything's going to be fine. So it wouldn't surprise me if in the end there's a 'quote, unquote agreement' with the EU." He argues it would be prudent for the EU to focus on policy outcomes rather than perceptions of who has won. "Let him have the win. If you let him have the win, what he wins doesn't matter. So you don't have to give up very much if you handle it right." One area where there has been a lot of speculation around possible EU concessions, away from tariffs, is on its digital policy, particularly its Digital Services Act and possible digital sales taxes. Germany has been considering a 10% tax on the sales of US digital giants such as Google and Meta's Facebook in Europe. Trump has spoken out against such plans and this week Canada dropped a digital sales tax proposal to keep trade talks with the US alive. Reinsch thinks the EU should prevent member states introducing these taxes because "Trump is right" in his position, he argued, and that is "not even rhetoric." "I think they are clearly discriminatory against some American companies," he said, adding that from a policy standpoint "it's totally the wrong approach." "If you want to build European competitors, you don't do that by dragging down the competition this way. You do it by building European competitors and creating viable options," said Reinsch. As the July 9 deadline looms, serious consideration is being given to the implications of a negotiations blow-up. The EU has described thetrans-Atlantic trade relationship as "the most important commercial relationship in the world," as bilateral trade in goods and services reached €1.6 trillion ($1.88 trillion) in 2023, according to EU Commission data. Kirkegaard says a no-deal scenario could lead to the requirement for fiscal stimulus in some EU countries due to "short-term volatility." But the EU can cope with that, he believes. "We would not be back in [financial crisis of] 2008 or facing a situation similar to even the energy price shock that happened after the Russian invasion in 2022 — absolutely not," he said. He expects the EU to "lose half a percentage point of growth" this year and next year, which was "not trivial," but at the same time "nothing we couldn't live with." Reinsch has a different view, saying a failure would be "bad news" for everybody. "I think in terms of actual trade, it probably would not be as impactful as a blow-up with China because we buy so much more from China. But in terms of disrupting the relationship and particularly disrupting trans-Atlantic investment, I think it would be a huge problem."

Trump tariffs: Crunch time looms in US-EU trade talks – DW – 07/04/2025

DW

an hour ago

DW

Trump tariffs: Crunch time looms in US-EU trade talks – DW – 07/04/2025

EU and US negotiators are attempting to finalize a deal on tariffs before an impending deadline on July 9. Experts say a no-deal scenario is possible. July 9 is almost upon us. That's when 50% tariffs could kick in on EU goods sold to the US if the two sides don't strike a deal beforehand. US President Donald Trump hit EU goods with a baseline tariff of 10% on April 2, and a rate of 25% on imported cars and 50% on steel and aluminum. He threatened to ramp the 10% rate up to 50% by April 9, but a stock market selloff prompted by his tariffs led to a postponement. In the meantime, EU and US negotiators have been working to strike an agreement ahead of the looming deadline, amid doubt in European capitals that EU Trade Commissioner Maros Sefcovic will be able to strike a deal that satisfies the member states. European Commission President Ursula von der Leyen told a press conference on Thursday (June 3) that striking a comprehensive trade deal in 90 days was "impossible" but was hopeful of "an agreement in principle", specifically referring to the agreement the US and UK had struck as a model to aim for. Those watching the negotiations closely say there have been sharp divisions among European Union member states over what concessions are acceptable and on what the US side should offer. For example, German Chancellor Friedrich Merz has spoken of the need to strike a deal quickly, criticizing the European Commission's "complicated" approach. "What is at stake here is the rapid resolution of a customs dispute, particularly for our country's key industries," he said. Yet, French President Emmanuel Macron has decried the idea of tariffs being levied by powerful countries as "blackmail", without specifically referring to Trump. Jacob Funk Kirkegaard, from the Peterson Institute for International Economics in Washington D.C., doesn't think the position of the German chancellor will be "acceptable" for all EU members. "Merz has said a number of times that we can live with a 10% across the board tariff. As long as we don't get a 25% sectoral tariff on cars, etc.," he told DW. While the comments of Sefcovic and von der Leyen have been somewhat conciliatory towards Trump and the US, Kirkegaard considers this to be an attempt to maintain unity amongst member states. "That's basically the Commission trying to protect itself against attacks from member states, because it's obviously they would have to bear the consequences of a trade war," he said. If the UK deal is a model, then the EU will likely have to live with 10% tariffs remaining in place on many goods, as the UK has done. The US-UK agreement cut the 25% tariff on UK cars to 10%, but the number of cars that can be imported on that duty is limited to 100,000 — roughly the amount of cars the UK sold to the US in 2024. Any cars exported above that quota will be subject to a 27.5% tax. The EU sold over 700,000 cars to the US last year. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video However, Kirkegaard believes if the steep car, steel and aluminium tariffs remain at the same level, it will hard for many on the EU side to accept. "As long as that's the case, there's not going to be a deal, in my opinion," he said. "It is ultimately not acceptable to the EU, which is an economy roughly comparable in size to the US, for US tariffs to go up and the EU's to not go up." Kirkegaard argues that in a trade confrontation between economies of the same size, tariffs should "go up together and down together." Bill Reinsch, a senior economics adviser with the Washington-based Center for Strategic and International Studies (CSIS), thinks a UK-style agreement is the most likely outcome. However, what is most important for Trump is the perception that he has "won" rather than what has actually been agreed, Reinsch told DW. "What matters for him is the Oval Office meeting, that so-and-so was agreed, and now everything's going to be fine. So it wouldn't surprise me if in the end there's a 'quote, unquote agreement' with the EU." He argues it would be prudent for the EU to focus on policy outcomes rather than perceptions of who has won. "Let him have the win. If you let him have the win, what he wins doesn't matter. So you don't have to give up very much if you handle it right." One area where there has been a lot of speculation around possible EU concessions, away from tariffs, is on its digital policy, particularly its Digital Services Act and possible digital sales taxes. Germany has been considering a 10% tax on the sales of US digital giants such as Google and Meta's Facebook in Europe. Trump has spoken out against such plans and this week Canada dropped a digital sales tax proposal to keep trade talks with the US alive. Reinsch thinks the EU should prevent member states introducing these taxes because "Trump is right" in his position, he argued, and that is "not even rhetoric." "I think they are clearly discriminatory against some American companies," he said, adding that from a policy standpoint "it's totally the wrong approach." "If you want to build European competitors, you don't do that by dragging down the competition this way. You do it by building European competitors and creating viable options," said Reinsch. As the July 9 deadline looms, serious consideration is being given to the implications of a negotiations blow-up. The EU has described thetrans-Atlantic trade relationship as "the most important commercial relationship in the world," as bilateral trade in goods and services reached €1.6 trillion ($1.88 trillion) in 2023, according to EU Commission data. Kirkegaard says a no-deal scenario could lead to the requirement for fiscal stimulus in some EU countries due to "short-term volatility." But the EU can cope with that, he believes. "We would not be back in [financial crisis of] 2008 or facing a situation similar to even the energy price shock that happened after the Russian invasion in 2022 — absolutely not," he said. He expects the EU to "lose half a percentage point of growth" this year and next year, which was "not trivial," but at the same time "nothing we couldn't live with." Reinsch has a different view, saying a failure would be "bad news" for everybody. "I think in terms of actual trade, it probably would not be as impactful as a blow-up with China because we buy so much more from China. But in terms of disrupting the relationship and particularly disrupting trans-Atlantic investment, I think it would be a huge problem."

China, EU Should Not 'Seek Confrontation': FM Wang

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EU and Germany push for a new World Trade Organization – DW – 07/04/2025

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