EU Enlists Trade Rival China to Counter U.S. Protectionism

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Europe’s push to cooperate with Beijing on WTO overhaul expands European efforts to open Chinese and other markets.

The European Union is pressing China to open its economy to outsiders and help revamp an international trade system now under fire by the Trump administration.

The push follows an EU campaign to form free-trade agreements with other allies and counter the effects of rising protectionism. On Tuesday, the EU signed a deal with Japan, the bloc’s biggest-ever trade pact, and last month began free-trade talks with New Zealand and Australia.

The flurry of activity reflects European efforts to rally global support for free trade and to counter pressure from President Donald Trump, who has erected U.S. tariffs in his “America First” campaign to buoy domestic industries from metals to washing machines.

Top EU officials this week traveled to Beijing to urge their Chinese counterparts to ease foreign-investment restrictions and curb support for domestic industries widely seen as distorting global markets, such as steel. The EU and China also agreed to work jointly to overhaul the World Trade Organization, which underpins global free-trade.

“Our logic is very simple: We need to move to WTO 2.0,” an EU official said. “And that doesn’t only require the U.S., but also China.”

Efforts by the EU, Japan and the U.S. to overhaul the WTO began in December with a focus on regulation of subsidies and state-owned enterprises—major drivers of China’s economic model. European and Chinese negotiators, long at odds, acknowledged gaps in global trade rules.

“We want to rewrite the rulebook together, not to destroy it alone,” European Commission President Jean-Claude Juncker said Tuesday in Tokyo after signing the EU-Japan trade deal. “This is why we are also working together with our Japanese friends and with others.”

Mr. Trump said recently he considers the EU a “foe” on trade but invited Mr. Juncker to the White House next Wednesday for talks on trade and other issues.

Mr. Juncker and other EU leaders say unilateral White House trade measures—such as steel and aluminum tariffs against U.S. allies on national security grounds—threaten to undermine international pacts. The Trump administration has sought to form bilateral pacts to replace multilateral ones.

“The existing WTO rules do not allow unfair practices to be dealt with in the most effective way,” Mr. Juncker, the top EU executive, said in Beijing this week. “But instead of throwing the baby out with the bath water, we must all preserve the multilateral system and improve it from within.”

The EU must balance a desire to partner with Beijing to counter the U.S. with concern over anticompetitive policies in China.

On Wednesday, Brussels signaled it would continue countering Chinese trade practices even as it seeks to cooperate with Beijing on WTO overhaul. The bloc said it imposed provisional anti-dumping duties ranging from 21.8% to 83.6% on electric-bikes from China, foreshadowing a final decision expected by year-end. Separately, the EU is also investigating state-subsidies for Chinese e-bikes.

China has increasingly used the mounting trade spats to portray itself as a protector of the rules-based international order, while chastising the U.S. for disrupting global commerce.

“The escalating trade war has become the biggest confidence killer of the world economy,” Chinese Foreign Ministry spokeswoman Hua Chunying said Wednesday. “Initiating a trade war for selfish interests is typical unilateralism and zero-sum game mindset. It is a retreat from the international rules and global governance since the Second World War.”

China’s engagement with the EU is driven by its desire to keep open world markets that its manufacturers need to thrive.

In a nod to longstanding EU concerns over unfair treatment of European investors and exporters in China, Beijing has committed to improving market access and relaxing its foreign-investment restrictions by bolstering intellectual property rights and expanding imports.

The EU is China’s largest trading partner; the bloc’s Chinese imports hit a record high €375 billion ($436 billion) last year. China is the EU’s biggest export market after the U.S., with 2017 sales nearly €200 billion.

China and the EU said Monday in a joint statement that both “are strongly committed to fostering an open world economy.”

But some observers remain wary.

Roderick Abbot, an ex-EU ambassador to the WTO and a former deputy director general of the organization, expressed “doubts about the real outcome” of the cooperation.

He said the EU is well placed to bridge U.S. and Chinese positions for a grand bargain, but Beijing is unlikely to negotiate under the threat of more U.S. tariffs. “The Chinese problem is the same as with everyone else’s problem, which is that the Americans want to unwind the WTO.”

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