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Trump’s Imperial Overreach on Trade

Mar 6, 2019 Daniel Gros

As part of its effort to contain its main global rival, the US is trying to secure the power to prevent the United Kingdom and the European Union from so much as negotiating trade agreements with China. Although a post-Brexit UK will probably have little choice but to follow Canada’s lead and comply, the EU is big enough to say no.

LOS ANGELES – Two recent developments are bringing America’s trade strategy toward China into focus. The first, which affects bilateral trade negotiations, is no surprise: US President Donald Trump has abandoned his bluster for vague promises – to enforce property rights, loosen restrictions on foreign investment, and stop pressuring foreign companies to share their technology – that China has made before. The second development, which concerns America’s allies, is more revealing – and treacherous.

In the last few months, the Trump administration has released its negotiating objectives for a possible trade agreement with the United Kingdom after Brexit, as well as future talks with the European Union. Most of those objectives are not particularly surprising; they seek to maximize access to UK or EU markets, while protecting sensitive US sectors. But they do include one highly unusual provision.

In its document on the EU, the US states its intention to secure “a mechanism to ensure transparency and take appropriate action if the EU negotiates a free-trade agreement with a non-market country.” The “non-market country” is no doubt China. If the EU agrees to this demand, it would have to inform the US – which would have the right to intervene – even if it is merely negotiating a trade deal with the world’s second-largest economy.

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j. von Hettlingen Mar 10, 2019

Daniel Gros says Trump could meet the same fate as Napoleon, whose imperial overreach proved his undoing. Trump’s trade hawks have devised a plan to insert a “poison pill” clause into future free trade agreements which would allow the US to terminate them if partners strike deals with Beijing. Trump sees China as America’s main strategic adversary and he is hellbent on containing its rise and preserving the US global hegemony.
The author says Napoleon deployed economic weapons in 1806-07 by erecting the so-called Continental Blockade, that was designed to destroy British commerce. He forbad any territory he ruled to trade with Britain. By forcing others “to bend their trade policy to his will, Napoleon inadvertently fueled hostility to his rule, especially in Northern Europe, where trade with Britain had played a vital role in the local economy.”
Although the blockade stimulated manufacturing in some parts of France, the system damaged regions dependent on overseas commerce. As the British had an overwhelming superiority at sea, enforcing the system proved disastrous for Napoleon. His efforts to halt evasions of his blockade stretched French forces thin, and ultimately provoked his calamitous invasion of Russia in 1812, which aimed to force Tsar Alexander I to join his blockade.
Napoleon headed the biggest army ever assembled at the time for a military campaign - 614,000 men of over 20 different nationalities. Within six months 9 out of 10 of them were dead. He was welcomed in Lithuania and Poland as liberators from the Russian despots. Later in September, he was entrenched in the Kremlin. As winter set in, he ordered a retreat, but the cold and hunger were exacerbated by the vengeance exacted by the Cossacks and Russian troops. The devastating Battle of Borodino sealed his fate at Waterloo three years later.
The author says Trump is “obsessed” with reining in China, and he prevents America’s allies – the EU, UK and Japan – from striking separate trade deals with Beijing. But this could prove “extremely costly” for them, and they might disregard his directive and forge their own trade deals with China. In a joint effort to salvage the nuclear deal with Iran, the EU and the UK have created a trading system that could be used to allow European firms to bypass US restrictions in dealing with Iran.
But Britain could be forced to pick a side in the ongoing bitter dispute between the US and China, as it searches for post-Brexit trade deals. While it “will probably have little choice but to follow Canada’s lead and comply, the EU is big enough to say no.”
In a document on the EU, the US “states its intention to secure ‘a mechanism to ensure transparency and take appropriate action if the EU negotiates a free-trade agreement with a non-market country.’ The ‘non-market country’ is no doubt China. If the EU agrees to this demand, it would have to inform the US – which would have the right to intervene – even if it is merely negotiating a trade deal with the world’s second-largest economy.”
This “unusual provision” has sparked fears, limiting Britain’s trade prospects after leaving the EU. What is ironic is that Brexiteers voted to leave the EU in order to “Take Back Control” and to escape regulations. However, with these US demands, the UK will lose its autonomy over trade policy and be free to forge its own trade deals. The dream of a “Singapore-on-Thames” is “unlikely to materialize.”
It remains to be seen what consequences Trump’s “imperial overreach” will have on his presidency.
- P. Kamath Mar 11, 2019
  
  You say," ......Trump’s trade hawks have devised a plan to insert a “poison pill” clause into future free trade agreements which would allow the US to terminate them if partners strike deals with Beijing...,.," It is there in the new US-CANADA-MEXICO pact unfortunately. Smaller countries have no choice.
  
  But it may not work with bigger countries in the future in the future like India who could be as head-strong and nationalistic as anybody else!
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Eustaquio Vera Mar 10, 2019

Stick to Napoleon. Pres. Trump proposes a new view to trade, which includes Exherting Market Power. If Europe does not adhere, no matter how justified Trump's position is, it may fail. The key is to stop exporting Capital, like businesses or land. Otherwise deficits will favor China, as will all forms of Power. HELP INDIA TO DEVELOP AND COMPETE WITH CHINA.
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Joseph Zorzin Mar 9, 2019

China never would have become a problem if American, European and Japanese corporations had not invest trillions in that country to obtain cheap labor. So if Trump wants to weaken China he can demand that those companies dis-invest in China. That will be more successful than demanding China to abandon its successful policies.
- P. Kamath Mar 11, 2019
  
  Senhor: It was the short sightedness and greed of of Western nations that made them think that one could use coolie labour in China, manufacture at slave labour cost , dump industrial waste in China and stilkl make profits forever in importing nations. Those days where on imagines Chinese as pig-tailed, pantaloon wearing guys are gone!
  
  Not withstanding the fact, Communist Chinese leaders could be brutal on issues of human rights of their own citizens, one must admit they had a long history of rich civilization, culture, empire etc. they are not dwelling in caves. they are too many, powerful and sophisticated.
  
  So give up the idea of containing China by de-investing. These are new actors on the world scene.
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Elizabeth Pula Mar 6, 2019

03/06/2019- His- story repeating itself: This imperial "overreach" is somebody else's undoing, in living color, no less- unbelievable:

https://www.newsweek.com/donald-trump-mental-cpac-msnbc-morning-joe-1352274

Take 2:
https://www.youtube.com/watch?v=WzrvrunMrFM
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Bernhard Kopp Mar 6, 2019

This is a great lecture on international trade politics. Hope it receives broad attention. Thank you !
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Philip Ralli Mar 6, 2019

But surely one 'feature' of the 'Brexit Backstop' is to make it difficult for the UK to make new FTAs by embracing the UK in some sort of customs union…
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P. Kamath Mar 6, 2019

The last. Sentence says it all!

Recently, US Secretary Pompeo warned India , politely of course, for its offer to invite China's Huwawei to conduct 5G trials in India.

Huawei has been shut out of some major 5G markets because of security concerns. But it may still have a shot in India which is one of the world's hottest smartphone market. India is dependent on USA for supplying some sophisticated military equipment ie artillery , helicopters etc.

One has to wait and see if twisting arms by USA won't backfire!
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