Answering Trump

US-China trade dispute sparks call for WTO reform

G20 Summit Germany
What happens now isn't just up to the men. Source: picture alliance / AP Images

The main actors in this trade war might be the United States and China, but Europe’s largest economy certainly has something to say: Germany, worried that US President Donald Trump is on course to wreck the rules governing global trade, is starting to talk about reforming the World Trade Organization.

“The EU Commission should seek allies for a new negotiating round over the global rules of trade,” Carsten Linnemann, a lawmaker for Chancellor Angela Merkel’s conservatives, told Handelsblatt. “The dispute over punitive tariffs and countermeasures shows this is urgently needed.”

China on Monday fired a salvo in what is fast turning into a global trade war. The Asian power said it was increasing tariffs by up to 25 percent on 128 US products, from frozen pork and wine to certain fruits and nuts. It comes after Mr. Trump moved to impose tariffs on steel and aluminum imports last month. He has also proposed tariffs on up to $60 billion of Chinese goods over what the US administration says is misappropriation of US intellectual property.

“It threatens a return to the law of the jungle.”

Dieter Kempf, Federation of German Industry

The tit-for-tat moves have implications well beyond these two countries. “It threatens a return to the law of the jungle with incalculable consequences for global trade,” said Dieter Kempf, president of the BDI Federation of German Industry. The US president is leading the rules-based international trading system “into the abyss,” he added.

WTO Director General Roberto Azevedo warned that global growth could decline “very quickly” as a result of the dispute, which is among the most serious the WTO has faced in the 23 years since it was set up. Yet convincing the US that the answer lies in a reform of the organization could be challenging. Mr. Trump last month said the WTO had been “a disaster” and “great for China and terrible for the United States.”

The German government and European Commission are conflicted about exactly how to respond to the latest tensions. The EU has long been demanding that China give EU firms the same kind of access that China enjoys in Europe, which suggests it should side with the United States, but Germany also has no interest in a trade war spiraling out of control.

Economics Minister Peter Altmaier said he hoped the EU and US would find a “common line” on intellectual property in the coming months. “We want to find solutions that are compatible with international trade rules,” he told Spiegel magazine.

Europe also still faces its own threat of US tariffs. Mr. Altmaier has sought to mollify the Trump administration by suggesting Europe could lower its own tariffs on cars and assuring the US government that he would push for Germany to increase its military spending towards the agreed NATO target of 2 percent of GDP.

Others, however, don’t want Berlin to be seen as cowing down in the face of threats. Peter Bofinger, a member of the German Council of Economic Experts that advises the government, warned it could set a dangerous precedent. “It may only encourage him to come up with more demands.”

Lea Deuber and Annette Meiritz are correspondents for Handelsblatt in Washington. Donata Riedel is a correspondent for Handelsblatt in Berlin. David Crossland adapted this story for Handelsblatt Global into English. To contact the authors: Meiritz@handelsblatt.com and Riedel@handelsblatt.com

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