As Washington and Beijing teeter on the brink of a possible trade war, the European Union and China have agreed to launch a working group to promote reform at the World Trade Organization. The move is part of an effort to upgrade the global trade system’s toolbox and ward off growing threats to the multilateral trade system and body.

According to a top EU official, the reform group would look at ways to modernize regulations and address the problem of state subsidies and other unfair trade practices.

How willing a participant Beijing will be in that effort is unclear as most of the EU’s proposed upgrades are connected to unfair trade measures, practices and policies that exist in China. The same concerns are driving the administration of President Donald Trump to press forward with the possible threat of heavy tariffs on some $34 billion in Chinese goods.

The Trump administration announced Monday that it is also mulling restrictions on foreign investments in technology. 

European Union Vice President Jyrki Katainen admits that the effort to try and promote reform of WTO rules will not be easy. He said it would take time and that China would have different views on priorities. 

But, Katainen added that if nothing is done, “the environment for multilateral trade will vanish.”

State media in China has portrayed Monday’s meetings with EU officials, a high-level dialogue ahead of next month’s EU-China summit, as the two teaming up to combat “unilateralism and protectionism” and promote globalization and protecting the global economy.

The European Union wants the reform effort to address issues such as industrial subsidies and unfair trade practices such as the forced transfer of technology in exchange for market access. 

“The two issues together are some of the reasons why, not the only reasons but some of the reasons why the president of the United States is taking unilateral action,” Katainen said, adding that the issue instead has to be solved in an orderly manner.

The basic idea is to update the WTO so that it is better suited to the current realities of the modern world, he said.

“The EU is not siding with any party or any country, the only thing we are siding with is rules-based trade,” Katainen said.

Chinese state media have portrayed the effort as a sign that Washington’s trade actions are creating a united front between the EU and China. A report in the Beijing-based newspaper Global Times called the joint effort to combat “unilateralism” and “protectionism” a “clear rebuttal of punitive U.S. tariffs on European and Chinese goods” and defense of the “multilateral trade system.” 

A report in the China Daily highlighted how trade frictions were bolstering closer trade ties between the EU and China. 

At the release of a survey on the business climate in China last week, the head of a top European businesses lobby noted that some companies, perhaps one or two, have already seen benefits from the ongoing trade dispute. 

Mats Harborn, president of the European Chamber of Commerce, said that it was not possible to tell if that is a trend but added that trade tensions are not good for business. 

“We don’t want companies to benefit from this trade war, we would like to see that we are all competing on a level playing field in China,” Harborn said.

In remarks following meetings with Katainen on Monday, Vice Premier Liu He did not mention the reform working group proposal for the WTO specifically. He did say that both countries agreed to pay attention to market access issues facing businesses on both sides and that they agreed to “reform the multi-lateral trade system and keep it advancing with the times.”

At a so-called “press conference” with Katainen, where journalists were not allowed to ask questions, Liu said “unilateralism and trade protectionism” was on the rise and that the European Union and China agreed to prevent such practices from impacting the world economy or dragging it into recession. 

Monday’s high-level dialogue was held in preparation for the EU-China Summit, which will be held next month on July 16-17th. During that meeting the two are looking to move forward a Comprehensive Agreement on Investment and to exchange market access offers. 
…