The Unlikely, Obvious Solution to the Trade War
New York Times
Enter Europe: It is uniquely positioned to lead such reforms thanks to its longstanding strategic alliance with the United States, its growing economic connections with China and its steadfast support for the W.T.O.
Economic links between the United States and China are pervasive, but those between Europe and China are deeper. The total of Europe’s investment flows to China were more than twice those of the United States between 2005 and 2016, according to United Nations agencies.
Like the United States, Europe is concerned about some of China’s restrictive practices — for example, the fact that China limits foreign investment in its financial services, energy and communications sectors. But unlike the United States, the European Union isn’t caught up in a great-power rivalry with China, and it is less concerned about the security implications of, say, China’s efforts to develop semiconductors and aircraft.
So far, Europe’s leaders had been too preoccupied with their respective domestic concerns — Brexit, rising populist sentiments — to focus on reforming the global trading system. But America’s latest tariffs on China will hurt Europe, too, given Europe’s links with the Chinese economy. And just last week, the European Commission laid out a proposal for reforming the W.T.O., including new rules to deal with forced technology transfers and the rise of e-commerce.
If Europe develops a common understanding with China on how to revamp the organization, the option will become more difficult for the United States to ignore.
The Trump administration would, of course, need to change its current position. But shifting political and economic circumstances may give it a reason to. Whereas the vast majority of Republican respondents in a recent survey by the polling firm SurveyMonkey said they supported tariffs, many Republican political leaders do not. A victory by the Democrats, who mostly oppose tariffs, in the midterm elections could change the dynamics of the debate.
The White House could also point to any thorough overhaul of the W.T.O. as a victory, and an admission on China’s part that the United States’ concerns were legitimate. It could then address any specific issues that remained in a bilateral investment treaty, which the U.S.-China Business Council has been advocating.
As the costs of this trade war add up in the United States, too, more rational minds may prevail in Washington. And they will see that the way out of the impasse runs through the W.T.O., whether Mr. Trump likes it or not.