The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

12th EU-China Business Summit: ‘Strengthening the pillars of global trade and investment’. European Union headquarters. Brussels, Belgium. The Chinese Prime Minister Li Keqiang, on the left, and Jean-Claude Juncker, President of the European Commission open the Summit. Date: 02/06/2017. Location: Brussels – Palais d’Egmont.© European Union, 2017/ Source: EC-Audiovisual Service/Photo:Etienne Ansotte.

After months of silence and no progress since the negotiations were officially put on hold, last week the TTIP reappeared on the main pages of the international press. According to US Commerce Secretary Wilbur Ross the Transatlantic Trade and Investment Partnership indeed would not be dead as of yet, and the US would be “open” to resuming stalled talks with the EU. The news itself represents an unexpected turn of events in a question that many considered totally closed, while after the just concluded 19th EU-China summit Brussels seems more than ever determined to boost trade and investments with China in the coming months.

Background

After three years of talks and fifteen rounds of negotiations, TTIP talks between the European Union and the United States are now effectively on hold since last October. The lack of support and attention around the mammoth trade deal between the two superpowers, which would set up a huge free trade area on both sides of the Atlantic, made the proposed agreement practically collapse right after former US President Barack Obama left his cabinet. Negotiations quickly drifted to ice when President Trump was elected riding the wave of protectionist claims, after his continuous attacks to multilateral trade agreements during his campaign. Indeed the Trump administration withdrew from the TPP, the Trans-Pacific Partnership trade pact with Pacific Rim nations, right after the former tycoon was elected.

Last week’s plot twist

The silence around the proposed EU-US free trade pact lasted until last week, when US Commerce Secretary Wilbur Ross “broke the ice” and told US broadcaster CNBC on Tuesday he is open to continuing talks on a proposed trade pact with the European partners. “It’s no mistake that, while we withdrew from TPP, we did not withdraw from TTIP”, Mr. Ross said. “The EU is one of our largest trading partners, and any negotiations legally must be conducted at the EU level and not with individual nations”, he added. “Thus, it makes sense to continue TTIP negotiations and to work towards a solution that increases overall trade while reducing our trade deficit”, he also said.

Trade deficit

Mr. Ross’ remarks came as US President Donald Trump complained about the EU’s trade surplus with the US, especially with Germany, and expressed his fury in a tweet, vowing to remedy a “massive” deficit with Berlin. President Trump said the United States has a “massive” trade deficit with respect to the EU’s largest economy, Germany, putting the word in all caps. “Very bad for US. This will change”, he declared via Twitter.

CNBC has obtained copies of trade deficit data that was given to Ross by the Coalition for a Prosperous America, an anti-free trade think tank, which purports “to show the trade deficit the United States has with Germany and with the EU overall”, as reported by the US broadcaster. According to the U.S. Census Bureau, the U.S. trade deficit with the EU in 2016 stood at $146.3 billion. So far in 2017, that deficit is at $32.1 billion.

Germany’s moves

President Trump has reportedly raised the same concerns on many previous occasions, as part of a wider plan to promote bilateral agreements instead of big multilateral pacts like the TTIP. This happened as well during Chancellor Angela Merkel’s visit to Washington in March this year, where she urged Mr. Trump to resume talks with Brussels in order to secure trade agreements, because Germany cannot conduct trade talks on its own.

Meanwhile, it looks like the Bundesrepublik is not intended to just stare and wait on Washington to come back with a decision on the future of international trade, but it is actually well determined to be the champion of its own fate. According to the latest news, Germany is determined to strengthen its partnership with China and to expand their collaboration to also continue fighting climate change, following the withdrawal of the US from the Paris Agreement. “We are living in times of global uncertainty and see our responsibility to expand our partnership in all the different areas and to push for a world order based on law”, Reuters quoted Merkel as saying last week after her meeting with PM Li.

EU-China Summit

Berlin was the first stop of a European trip for Chinese Premier Li Keqiang to attend to the 19th EU-China Summit, as part of a plan to strengthen ties amid increasingly tense relations with the US. According to Chinese news agency Xinhua, the summit played an important role, and China and Germany have agreed to speed up negotiations on a China-EU investment agreement, as well as to “further enrich” the two countries’ cooperation and ties. “China has become a more important and strategic partner”, Chancellor Merkel said at a news conference with Chinese PM Li, pointing to political, economic, social and cultural ties.

The President of the European Commission Jean-Claude Juncker expressed satisfaction during the Summit and his will to boost economic relations with Beijing. “Our partnership today is more important than ever before”, he said. “Today, the EU is China’s most important destination for outward investment […], but there is scope for much more. China accounts for less than 5% of foreign investment in the EU. While Chinese investment into the European Union increased by 77% in 2016, the flow in the other direction declined by almost a quarter. To put that into context, EU investment into China last year was roughly 3% of what we invested into the United States”.

A plan for trade

So despite having presented quite a fragmented situation, last week has offered a series of important elements in the international trade scene. The EU seems determined to move forward with trade agreements as the ultimate solution to boost trade and growth. However, despite the recent declaration over a possible renewed interest around TTIP in America, it looks like Brussels is more willing to strengthen its relations with Beijing as a response to US President Trump’s protectionist policy. We will only know whether last week represented a new start for the EU-US trade pact or the beginning of the end, in the coming months.

China is the EU’s biggest source of imports and its second-biggest export market. China and Europe trade on average over €1 billion a day. EU-China trade in services amounts to more than 10% of total trade in goods, and the EU’s exports of services make up 19% of EU’s total exports of goods.

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