EU unveils Asia infrastructure plan, denies rivalry with China


Robin Emmott September 19, 2018

BRUSSELS (Reuters) – The European Commission proposed on Wednesday a foreign policy plan to improve transport, energy and digital infrastructure links with Asia but denied seeking to counter China’s ambitions that have raised suspicion in Western capitals.

The plan, which would be backed by additional funds from the EU’s common budget from 2021, private sector loans and development banks, amounts to a strategic response to China’s largesse in much of central Asia and south-eastern Europe, where Beijing has invested billions of dollars.

The 13-page strategy outlined by the EU executive did not specify how much the bloc would spend, but the Commission is relying on a proposed 60 billion euro ($70 billion) fund that would act as an insurance for investors if projects fail.

That fund could raise more than 300 billion euros between 2021 and 2027 by attracting investors into projects by offering a guarantee to cover the costs if a project fails.

Although not all money would be spent in Asia, the Commission’s strategy, once agreed by EU governments, would make spending on infrastructure links with Asia official EU policy.

EU foreign ministers are expected to approve it at a meeting on Oct. 15, three days before an summit between European and Asian leaders in Brussels.

Since 2013, China has launched construction projects across more than 60 countries, known as the Belt and Road Initiative, seeking a network of land and sea links with Southeast Asia, Central Asia, the Middle East, Europe and Africa.

EU foreign policy chief Federica Mogherini said the Commission’s proposal was not linked to any Chinese policies.

The Asian Development Bank estimates Asia requires more than 1.3 trillion euros a year in infrastructure investment, not all of which can be met by China, the Commission said.

“Our proposals, our policies and our calendar are not determined elsewhere,” Mogherini told a news conference when asked if the plan was a challenge to Beijing. “It is not a reaction … to another initiative … be it in Beijing, Washington, Moscow or Timbuktu.”

However, EU officials said they are concerned about what they see is a Chinese investment model which lends to countries for projects they may not need, or be able to afford, making them reliant on Chinese help once under way.

A Chinese-funded highway to link Montenegro’s Adriatic coast to landlocked neighbor Serbia has so indebted Montenegro that the International Monetary Fund has told the country it cannot afford to finish the project.

Jan Weidenfeld, an expert on Europe-China relations at the Mercator Institute for Chinese Studies (MERICS) in Berlin, said the EU plan was “very much a response to Belt and Road.”

“The main message is that when you’re creating large-scale infrastructure projects, you need to abide by certain norms or standards, whether they be environmental or financial. The EU sees a window of opportunity to steer Chinese policies here,” Weidenfeld said.

($1 = 0.8566 euros)

Additional reporting by Noah Barkin in Berlin; Editing by Robin Pomeroy

Source: Reuters “EU unveils Asia infrastructure plan, denies rivalry with China”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

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End of EU’s Trade War with China over Solar Panels


EU solar panel producers are unable to compete with Chinese ones. Like Trump EU adopted tariff hikes to help its producers but hurt solar panel consumers. Now, EU has to remove the unreasonable tariff hikes to benefit the consumers. So will the US do so in the long run.

The following is the full text of Reuters’ report on the event:

EU ends trade controls on Chinese solar panels

Philip Blenkinsop August 31, 2018

BRUSSELS (Reuters) – The European Union will end restrictions on the sale of solar panels from China early next week in a move that EU producers said would lead to a flood of cheap imports.

The European Commission, which coordinates EU trade policy, said in a statement on Friday that the measures would expire at midnight on Monday Sept. 3, confirming a Reuters report on Aug. 24.

The EU first imposed anti-dumping and anti-subsidy measures for Chinese solar panels, wafers and cells in 2013 and extended them by 18 months in March last year, signaling that they should then end.

Chinese manufacturers have been allowed to sell solar products in Europe free of duties if they do so at or above a progressively declining minimum price. If sold for less than that price, they are subject to duties of up to 64.9 percent.

The Commission said it was in the best interests of the EU as a whole for the measures to lapse, given the bloc’s aim of increasing its supply of renewable energy. The measures had also decreased over time, allowing import prices to align with world market prices, it said.

SolarPower Europe, which represents importers and installers, described the move as a “watershed moment” for Europe’s solar industry and that it removes the biggest barrier to growth of the sector.

The European Union has faced a delicate balancing act between the interests of EU manufacturers and those such as importers and installers pressing for a reduction in the cost of solar power generation.

It has also been concerned about the response from Beijing, given that the two sides were on the verge of a trade war over the issue in 2013.

EU ProSun, the grouping of EU producers that launched the initial complaint in 2012 and wanted a further extension of measures, had said that European manufacturers would be devastated if the measures ended.

Beijing’s decision to limit installations in China meant producers there had some 30 gigawatts of excess capacity to shift but with few markets to sell into after tariffs imposed by the United States and planned by India, the second and third-largest markets behind China. The total EU market is about 7 gigawatts.

Some companies were considering a legal challenge at the European Court of Justice. EU ProSun said, adding that years of falling prices had not resulted in growth of the European market.

Reporting by Philip Blenkinsop; Editing by Kirsten Donovan and David Goodman

Source: Reuters “EU ends trade controls on Chinese solar panels”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


U.S. touts EU trade truce, attention now turns to China


Steve Holland, David Lawder July 26, 2018

WASHINGTON (Reuters) – The United States signaled on Thursday it is set to push ahead on trade talks with Canada and Mexico after agreeing to suspend hostilities over tariffs with Europe in a fragile deal that may clear the way for renewed pressure on China.

A surprise deal struck on Wednesday will see Washington suspend the imposition of any new tariffs on the European Union, including a proposed 25 percent levy on auto imports, and hold talks over tariffs on imports of European steel and aluminum.

The deal boosted share markets initially, and U.S. industrial shares were stronger on Thursday as fears of a trade war with Europe ebbed.

Both sides claimed victory in the deal, reached by Trump and European Commission President Jean-Claude Juncker in Washington. In return for the talks and a suspension of auto tariffs, the EU will import more soybeans and energy from the United States.

A White House official told Reuters that Juncker had shown greater flexibility than expected in the talks and that while there was no deadline for an overall deal, Trump retained the power to impose tariffs if progress was not made.

One key aspect of the agreement, according to the official who spoke on condition of anonymity, was that the two sides had agreed to work together to tackle China’s market abuses.

“They want to work together with us on China and they want to help us reform the WTO (World Trade Organization),” said the official, adding that the Europeans came into the talks “with a real positive spirit”.

Trump has announced a series of punitive tariffs on Chinese imports in a bid to halt a Chinese surge in high-technology industries that threatens to displace U.S. dominance. Both the U.S. and the EU charge that Chinese companies steal company secrets.

On the North American Free Trade Agreement talks with Canada and Mexico, Treasury Secretary Steve Mnuchin said he was “hopeful that we’ll have an agreement in principal in the near future.”

“Whether it’s one deal or two deals, so long as we get the right agreement, we’re indifferent,” Mnuchin told CNBC.

Trump and officials from his administration said the EU had given ground by agreeing to import more American goods and to hold talks on tariff reductions including on cars, an industry in which Trump has accused Europe of imposing heavy duties.

EU officials said little had been given away by Juncker and that Europe had emerged as the winner by getting Trump to defer the threatened car tariffs which would have hit European carmakers hard.

The deal was hailed by commentators in the United States and Europe for drawing back from an escalation in a trade war that had threatened to take the world back to the kind of protectionism not seen since the 1930s, although some cautioned the relief may be only temporary.

French President Emmanuel Macron appeared to challenge the deal, saying on Thursday he would not discuss agriculture in talks with the United States.

If it holds, the US-EU pact could allow both to focus on China, whose economic rise threatens both. Lawmakers in Washington on Thursday passed legislation to slow Chinese investment in U.S. companies. In Europe, alarm bells have been sounded over China’s growing economic influence there.

“U.S. and EU will be allied in the fight against China, which has broken the world trading system, in effect,” Trump’s economic adviser Larry Kudlow said. “President Juncker made it very clear yesterday that he intended to help us, President Trump, on the China problem.”

In Beijing, Chinese Foreign Ministry spokesman Geng Shuang said trade disputes should be resolved through talks on the basis of mutual respect and equality.

“Engaging is unilateralism or protectionism is not the way out,” Geng said, when asked about Kudlow’s comments.

CASUALTIES IN TRADE FIGHT

Since taking office last year, Trump has implemented policies to restrict what he sees as unfair competition from other countries. He tore up an agreement to join a Pacific trade pact, has threatened to pull out of NAFTA, and imposed steel and aluminum tariffs aimed at China.

In an effort to rein in China’s high technology industries that he charges have stolen intellectual property from American companies, Trump has ramped up threats of tariffs on $50 billion worth of imports from China to $450 billion after China retaliated with its own duties on imports from the United States.

The impact has fallen mainly on U.S. farmers and Republican party lawmakers. A move by Trump to offset farmers’ losses with a $12 billion aid package drew criticism with farmers saying they wanted access to markets rather than subsidies.

U.S. Trade Representative Robert Lighthizer, a veteran of trade negotiations from former President Ronald Reagan’s administration in the 1980s who is Trump’s top trade official, told lawmakers in Washington that the United States could not afford to capitulate to China economically.

“I don’t think it’s a stupid fight,” Lighthizer said of the trade battle with China in heated exchanges in the Senate. “I don’t know a single person that has read this report that thinks it’s a stupid fight to say China should not be able to come in and steal the future of American industry.”

A more conciliatory tone emerged from Mnuchin, who told CNBC the United States was willing to reopen trade talks with China if Beijing was willing to make “serious changes,” as he said the EU had indicated it was willing to do.

In May, the United States and China initially appeared willing to strike a deal that would see China reduce its $350 billion surplus in the trading of goods by buying more U.S. agriculture and energy products.

That deal fell apart quickly and has been replaced with a rising tally of tariff retaliation that has led to Trump threatening tariffs on almost everything the United States imports from China.

China has threatened to retaliate dollar for dollar, and its refusal to sign off on regulatory approval caused a $44 billion deal from Qualcomm Inc (QCOM.O) to buy NXP Semiconductors (NXPI.O) to fall apart, a move that showed U.S. companies were being targeted unfairly, Mnuchin said.

Reporting by Susan Heavey and Lindsay Dunsmuir in Washington, Alastair MacDonald in Brussels, Ben Blanchard in Beijing and Leigh Thomas in Paris; Writing by David Chance; Editing by Will Dunham

Source: Reuters “U.S. touts EU trade truce, attention now turns to China”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Loss of Chinese Market, World Market Share, Permanent Harm to the US


Reuters’ report “Trump says China is ‘vicious,’ using U.S. farmers as trade pawns” shows that Trump is upset that China’s retaliation of tariff hikes hit US farmers hard. He has to provide $12 billion to help US farmers and made EU to buy more US soyabean.

With developed agriculture EU is America’s competitor in the world agricultural market. In addition, there are underdeveloped parts in EU with potential to increase farm production. Therefore, EU may only absorb a limited part of US surplus soyabean but is far from being able replace China in absorbing $13 billion soyabean that China would stop purchase from the US due to the trade war.

The US shall be clear that it is utterly impossible to find a market sufficiently large in the world to replace Chinese market, which has world largest population with increasingly greater demand for farm products as Chinese economy and people keeps on growing richer.

On the Chinese side, the trade war makes China realize the urgency of agricultural development for food self-sufficiency in case of war or serious natural disaster.

China has to speed up its project to divert water from Tibet to Xinjiang to convert its vast desert there into rich farm land. That will increase China’s farm land by at least 330,000 square kilometers through conversion of desert. It will enable China not only to put an end to most of its imports of farm products but also grab from the US share of world agricultural market.

It will be a lethal way that benefits China while “killing” the enemy in the trade war.

In a war one has to be vicious instead of kind. Are Trump’s tariff hikes that may cause Chinese enterprises to bankrupt not vicious?

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-usa-trade-farmers/trump-says-china-is-vicious-using-u-s-farmers-as-trade-pawns-idUSKBN1KF1J4.


Trump Shrewd Not to Fight Trade War in Two Fronts, China and EU


At first Trump carried on US traditional arrogance to be harsh on both China and EU, but now he has changed his strategy to try to make a deal with EU.

The US will be in a better position if EU supports it. Reuters says in its report “Breakingviews – Trump and Juncker revive Obama-era trade goals” today that Trump’s initial deal with EU to sell soyabean to EU shall be regarded as his success in obtaining EU’s support in his trade war with China.

Certainly EU also has to protect its farmers’ interests and may not allow US free access to EU’s agricultural market. Due to conflicts of interests especially the fierce competition between Germany and the US in the market of high-end industrial goods, prospect of further cooperation between EU and the US in dealing with China are not optimistic.

However, there are also conflicts of interests between EU and China so that China cannot expect that EU will help it in resisting US trade war attacks. EU may exploit the trade war between the US and China to be benefited from both China and the US,

China shall be prepared to win the trade war alone.

The calculation of 500 v. 150 mentioned in my previous posts “New American Dream: Stop China’s Rise, Maintain US Hegemony” and “Pink House’s Party to Celebrate Victory of Trade War with China” certainly cannot determine the results of the trade war as the value of the goods for exports that may subject to high tariff is but one of the factors and especially not the decisive factor.

There are exports other than export of goods, for example the exports of tourism services. US earned $33 billion in exports of such services in 2017. Unlike imports of goods, some of which are indispensable China can entirely do without import of US tourism services. The US will thus suffer a net loss of $33 billion from Chinese travelers. That may be more serious loss than the loss coursed to China by 10% tariff hike on $100 billion goods. The US may still have to import most of those goods as there are no alternative sources available within a short time.

Even in terms of trade there are quite a few other factors to be taken into account, financial services, legal services, accounting services, etc.

There are other ways that the US simply does not know.

Anyway, the results of a trade war to a very great extent are determined by the two sides’ economic strength. China is not weaker than the US in that respect. Its GDP has surpassed the US in PPP terms.

According to Chinese sage Mencius, popular support is vital. China has full popular support while in the US lots of people and companies oppose Trump’s trade war.

There is another vital factor, the wisdom and art of war of the commander. Trump has grown better in dealing with EU. If he is not stubborn to persist in withdrawing from the TPP, he will have more allies in dealing with China, but that does not seem possible.

Anyway, China shall not regard Trump as a stupid moron in dealing with the US. It shall design ingenious surprise moves to hit the US hard. Let’s wait and see.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-usa-trade-breakingviews/breakingviews-trump-and-juncker-revive-obama-era-trade-goals-idUSKBN1KF31S.


Why the Costs of Trump’s Trade Wars Will Linger for Years


Kimberly Ann Elliott |Tuesday, July 24, 2018

Officials from the European Union are headed to Washington this week for trade talks with the Trump administration, but nobody is optimistic. If the talks don’t go well, President Donald Trump has already said he is prepared to follow through on his threat of imposing further tariffs, as high as 25 percent, on cars and car parts imported from the EU. “If we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump told reporters at the White House last week. “Including cars—cars is the big one.”

However the meeting with European Commission President Jean-Claude Juncker goes, one thing is clear from this latest chapter in Trump’s quickly unfolding trade wars: Even relatively brief trade disputes can inflict costs that persist long after the war ends.

For one thing, there are direct costs arising from the disruption that higher tariffs wreak on supply chains. The Trump administration’s failure to quickly negotiate resolutions to its new trade disputes, or to conclude any new agreements, also puts U.S. exporters at a disadvantage in markets where trading partners continue to negotiate deals. And there is a range of other potential costs that could hit American producers and consumers for years, even if the current trade disputes are somehow resolved soon. But that is not looking particularly likely at the moment, and the longer the disruption lasts, the higher the risk to broader economic growth, both in the United States and around the world.

In terms of the most direct costs of trade wars, foreign buyers hit with retaliatory tariffs look for new sources. New suppliers do not disappear. Domestic plants that close or move due to higher costs or lost markets do not reopen. If the Mid-Continent Nail Corporation in Missouri, which has gotten so much news attention around the steel tariffs’ impact, closes and moves its operations to Mexico, the costs to reopen it when the tariffs finally disappear could be prohibitive. And those jobs could be lost forever. Meanwhile, farmers already grappling with lower commodity prices find themselves with unexpected surpluses that deepen debt burdens. South American farmers will be happy to increase soy and corn production to feed the fast-growing Chinese market, and will not readily cede that market down the road.

The Trump administration’s seeming preference for escalation over negotiation adds a layer of uncertainty about U.S. policy that could further disrupt supply chains and deter investment by and in American firms. Foreign direct investment into the United States dropped 40 percent in the first quarter of 2018 compared to the previous year, the lowest level in four years. Meeting in Buenos Aires over the weekend, finance ministers and central bankers from the Group of 20 large economies—including the United States, Great Britain, France, Japan, China, Brazil and Argentina—called for increased dialogue to reduce the financial risks from ongoing trade disputes.

Foreign direct investment into the United States dropped 40 percent in the first quarter of 2018 compared to the previous year, the lowest level in four years.

At the same time that President Donald Trump seems intent on closing the U.S. off from the rest of the world, other countries are continuing to negotiate agreements that will increase discrimination against American exporters. Japan led the way in salvaging the Trans-Pacific Partnership among 11 Pacific Rim nations after Trump rejected it. The deal, now minus the U.S., will lower the barriers that dairy farmers from Canada and New Zealand and cattle ranchers from Australia face in the Japanese market, giving them an advantage over American producers. Just this month, Japan and the European Union signed an economic partnership agreement that will give an edge to European winemakers. Eventually, Japanese auto producers will no longer face the 10 percent tariff in Europe that U.S. producers will continue to pay. While the Trump administration mulls additional barriers to trade with the rest of the world, Europe is negotiating to lower them with a long list of countries, including several TPP signatories in Mexico, Brazil and Argentina.

With regard to the trade war with China, Treasury Secretary Steven Mnuchin recently told a congressional committee that negotiations had broken down and that no resolution was in sight. At the G-20 meeting in Buenos Aires, Mnuchin said that it was up to China to make concessions, but he left those unspecified. If that means the trade war continues to escalate and drags on, the economic effects could become serious. Tariffs on all or most Chinese imports, as Trump has threatened, could even lead to inflationary pressures that cause the Federal Reserve to raise interest rates more than it otherwise would, which in turn could trigger a recession. The International Monetary Fund’s managing director, Christine Lagarde, told the G-20 ministers in Argentina that escalating trade fights could depress global growth by as much as half a percent.

Even if Trump’s trade war with China is resolved relatively quickly, the costs will linger and competition with China could become fiercer rather than fairer. Lack of clarity about the administration’s demands is one of the barriers to resolving the dispute. The overarching goal is purportedly to ensure that U.S. companies have a fair shot in developing and selling the technologies of the future. But, far from backing down on its “Made in China 2025” policy to develop key technologies domestically, China is likely to double down on its promotion of these sectors in order to avoid dependence on an erratic American partner.

American firms are also likely to come to rue the administration’s use of Section 232 of the Trade Expansion Act of 1962 to restrict imports for national security reasons. While the case for steel and aluminum as essential to national security is plausible, the application of tariffs against close neighbors, and allies and adversaries alike, undermined the case. The administration’s opening of a new investigation into automobile imports decimates any argument that the administration is genuinely concerned about national security. The absurdity of the administration’s case, in turn, opens the door to abuse of the national security exemption by other countries. Adjudicating the national security exemption is also a no-win situation for the World Trade Organization. If it eventually rules against the U.S. use of Section 232, the Trump administration could choose to ignore the ruling, or even use it as an excuse to withdraw from the WTO, as Trump has threatened. And if the administration wins the argument, it would be no-holds-barred for other member states seeking to protect their own industries for specious national security reasons.

Short of the extreme step of withdrawal from the WTO, U.S. policies are still a serious threat to the organization’s continued effectiveness—and that is a cost that cannot be measured solely in dollar terms. On top of the serious economic toll, the ultimate cost of Trump’s trade wars will be measured in frayed bonds and eroded trust that will take years to rebuild.

Kimberly Ann Elliott is a visiting scholar at the George Washington University Institute for International Economic Policy, and a visiting fellow with the Center for Global Development. Her WPR column appears every Tuesday.

Source: World Politics Review “Why the Costs of Trump’s Trade Wars Will Linger for Years”

Note: This is World Politics Review’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.


Trump Is Driving EU into China’s Arms


This is a very interesting era of world trade war. We may suffer the consequence of such a war, which I hope is not serious, but we shall not fail to be entertained by the developments.

There was the possibility of a real war with military forces between China and the US but due to Chinese President’ Xi Jinping’s resolute fast construction of artificial islands, a military war between the US and China has been avoided.

The US sent two aircraft carrier battle groups to force China to accept Hague arbitration award that deprived China of all its historical interests in the South China Sea but failed as China challenged it with war. US military was well aware that with three airstrips on China’s artificial islands supported by Chinese airbases along China’s coast the US has significant geographical disadvantages to fight a war with China in the South China Sea. Other seas along Chinese coast are too shallow for US huge submarines to maneuver. The US has to invest tens of billions dollars to develop B-21 to attack China.

Now, China has deployed its J-20 heavy stealth fighter jets for air supremacy to make it impossible for the US to win a war near China.

However, Thucydides trap still works in spite of that. The US has to defeat China in order to prevent China from surpassing it. Trump is shrewd to resort to less risky trade war to destroy China or at least hinder China’s rise.

However, he does not seem shrewd enough in trying to break the de facto alliance between China and Russia. The alliance makes it impossible for the US to defeat China even if the US has developed B-21 bombers to bomb Beijing. The US simply cannot break the alliance due to Russia’s economic dependence on China.

Anyway, it is really burdensome to deal with the alliance of two strong powers. Trump is wise to strive to improve relations with Russia so as to be able to concentrate US strength in containing China. But he fails to realize the difficulty to overcome American politicians, media and people’s hostility towards Russia so that his efforts have backfired.

China, however, has been benefited by Trump’s efforts to improve US relations with Russia.

Russia is EU’s major challenge. The two sides have been contending to win over Ukraine for a long time due to their core interests there, but the US has no such conflicts of interests with Russia. Therefore there are no significant obstacles to surmount for improvement of US-Russia relations. Americans’ hostility towards Russia is ideological without major conflict of interests.

If US-Russia relations have improved, EU members have to increase their military budgets for their defense against possible Russian aggression. Removing one enemy while reducing the burden to protect his European allies, that is Trump’s wishful thinking.

However, Trump fails to see that in doing so he is pushing EU to China’s side.

In my previous posts I said China-Russia alliance was impossible if Obama did not pushed them together. The two neighbors have a long history of conflicted interests.

Now, China and EU does not have serious conflicts of interests. EU wants China to open its market while China is precisely doing so as its further reform requires that.

EU fears China’s influence in eastern and central Europe, but China can prove to EU that its influence is purely economical. China has do so in Central Asia to convince Russia. It can also prove that to EU in eastern and central Europe.

Reuters’ report today titled “Forcing China on trade with illegal action will not work: EU’s Malmstrom” precisely proves that the Trump-Putin summit and Trump’s threat of trade war with EU are pushing EU to China’s side.

China is now making every effort to set up a united front with EU against the US. Quite a few analysts believe that such a united front is impossible, but Trump is making it possible.

Comment by Chan Kai Yee on Reuters’ report “Forcing China on trade with illegal action will not work: EU’s Malmstrom” today, full text of which has been reblogged by him in his post today.