Europe has no good options to respond to American subsidies for green energy and electric cars.
Politicians are right to worry that the tax breaks and buy-American provisions of the Inflation Reduction Act, coupled with high energy prices due to the war in Ukraine, could convince European companies to make the jump across the Atlantic.
But duplicating American protectionism would make things worse. (more…)
There’s not much elected politicians can do about high inflation. They might have inadvertently caused it with massive COVID-19 rescue and recovery programs, which saved businesses and jobs but also put money in the hands of consumers at a time when supply chains were strained. When producers can’t meet demand, prices rise.
Central banks have the strongest tools to fight inflation, but there is something governments can do: cut tariffs and regulatory barriers to trade. More and cheaper imports would reduce costs for consumers. (more…)
Regular readers will know I’m a fan of Emmanuel Macron. He is probably the most liberal president France has had since the Second World War.
Macron abolished a left-wing wealth tax that raised little revenue, eased regulations on small and medium-sized businesses, reined in generous salaries and pensions at the state railway, relaxed France’s strict labor laws and extended unemployment insurance to the self-employed. This week, he unveiled plans to build up to fourteen nuclear power reactors by 2050 to free France of fossil fuels.
If he is reelected in April, Macron would have a chance to reform France’s bloated retirement system, something none of his immediate predecessors dared for fear of inciting protests.
The one area in which Macron has been unwilling to challenge French orthodoxies is trade. (more…)
The European Commission has sided with the Netherlands and smaller nations against a Franco-German proposal for industrial policy.
The decision is a victory for Dutch prime minister Mark Rutte, who has formed a loose alliance of likeminded Central and Northern European member states to prevent a lurch to protectionism in a Europe without the UK. (more…)
During last year’s presidential election, Joe Biden promised to end America’s “artificial trade war” with Europe. His predecessor, Donald Trump, had imposed $7.5 billion worth of tariffs on European aluminum and steel.
Biden has relaxed the tariffs, but not abolished them. The EU has completely pulled down its retaliatory tariffs on bourbon whisky and Harley-Davidson motorcycles.
If anyone deserves credit for ending the trade war, it’s the EU. (more…)
Less than a year ago, Mark Rutte and Pedro Sánchez were on opposite ends of the debate about the EU’s coronavirus recovery fund. Sánchez and other Southern European leaders called for grants financed by EU-issued bonds. Rutte and his allies preferred loans. The two sides eventually split the difference.
Now the two prime ministers, one center-right, the other center-left, have made common cause for a version of European “strategic autonomy” that is more liberal than Emmanuel Macron’s.
In a joint “non-paper“, the Dutch and Spanish leaders endorse strategic economy as a means to an end — growth and security — but not an end in itself. They caution it mustn’t become an excuse for isolation and protectionism. (more…)
I haven’t read the 1,246 pages of the EU-UK trade agreement, so I’m going to rely on trusted sources to make sense of the accord.
First, a couple of notes on terminology.
This treaty, the EU-UK Trade and Cooperation Agreement, governs the future cross-Channel relationship. It is due to go into effect on January 1, although it will still need to be ratified by the parliaments of the European Union and the United Kingdom as well as the European Council.
Last year’s withdrawal agreement regulated Britain’s exit from the EU. It provided for a one-year transition period, which expires on December 31, and included a protocol for Northern Ireland, which keeps the province in the European single market for goods and effectively (but not legally) in the EU customs union to avoid the need for a border with the Republic of Ireland.
Both treaties have been unhelpfully referred to as “the deal” in the English-speaking press, but only the withdrawal agreement was crucial. The trade agreement, while good to have, since Britain does most of its trade with the EU, was always optional. (more…)
Emmanuel Macron and Mark Rutte belong to the same European liberal family, but they take different views on the future of the liberal world order.
The French president believes Europe should become less reliant on the United States and foreign trade. He argues for “strategic autonomy” in everything from the digital economy to defense to environmental policy.
The Dutch prime minister has doubts, rooted in decades of Dutch Atlanticism and centuries of overseas trade.
Both have allies.
Macron has the support of German chancellor Angela Merkel and European Commission president Ursula von der Leyen, a former German defense minister.
Rutte is backed by smaller countries in Central and Northern Europe as well others in the European Commission. The Financial Times reports that plenty suspect “strategic autonomy” is a fancy way to dress up French protectionism; are wary of formally endorsing the principle if it means undermining NATO and open trade; and are skeptical of the push for reshoring of industry and supply chains.
They have reason to be. (more…)
First tiny Wallonia threatened to derail the EU’s free-trade agreement with Canada. Now Cyprus, with a population of 1.2 million, is putting at risk a treaty that covers nearly 500 million consumers and 28 percent of the world’s economy.
Cypriot lawmakers voted 37 to eighteen against the Comprehensive Economic and Trade Agreement (CETA), which eliminates nearly all tariffs between Canada and the EU and includes mutual recognition of professional qualifications and product standards.
It’s one of those product standards the Cypriots are unhappy about. They argue CETA should close the Canadian market to foreign ripoffs of their national cheese, halloumi. (more…)
Kosovo’s new prime minister, Albin Kurti, is partially lifting his predecessor’s 100 percent import tariff on Serbian goods. He has offered to lift the tariff completely if Serbia suspends its derecognition campaign. If it fails to reciprocate, the tariffs will be restored in June.
Since reciprocation would imply Serbian recognition of Kosovo’s independence, it seems inevitable the trade sanctions will be back soon. (more…)
Dutch parliamentarians narrowly approved an EU trade agreement with Canada on Tuesday, but ratification of the treaty faces an uphill battle in the Senate, where Prime Minister Mark Rutte’s ruling parties do not have a majority.
If the pact isn’t supported by the Netherlands — one of the EU’s most liberal and free-trading nations — it would call the bloc’s ambition to uphold the global trade regime in lieu of American leadership into doubt.
Since Donald Trump was elected in 2016, the EU has completed free-trade agreements with Japan and South America. The first went into effect in 2019, the second has yet to be ratified. (more…)
Germany may be heading into a recession. Its economy shrank .1 percent in the second quarter of this year.
Donald Trump’s trade war with China is partly to blame, but it has also exposed Germany’s home-grown vulnerabilities: an overreliance on exports and weak domestic demand. (more…)
French president Emmanuel Macron has threatened to hold up ratification of an EU trade deal with Mercosur unless Brazil’s Jair Bolsonaro does more to fight fires in the Amazon Rainforest.
Canada, Finland, Ireland and the Netherlands have backed Macron up. Germany is less sure. Donald Trump is expected to side with Bolsonaro at the G7 summit this weekend.
Here are the arguments for and against the threat. (more…)
Since the European Commission blocked a landmark merger of the French and German train manufacturers Alstom and Siemens, France and Germany have come out in favor of a “genuine European industrial policy” to compete with China and the United States.
Smaller countries, led by the Netherlands and Poland, are wary. (more…)
On the heels of an arbitrary — and, it turns out, unnecessary — deadline, Canada, Mexico and the United States have finalized a renegotiation the North American Free Trade Agreement (NAFTA). The new deal is called the United States-Mexico-Canada Agreement (USMCA):
What’s in it? (more…)
