Europe must make trade agreements á la TTIP with the United States. So says Rem Korteweg, senior researcher and head of the ‘Europe’ department at Clingendael. In short, the World Trade Organization not only calls the WTO ‘paralysed’, the American state aid under the Inflation Reduction Act threatens to leak European technology to the US. It is high time for a transatlantic trade agreement.
The US Inflation Reduction Act leads to an imbalance of the level playing field between the US and Europe. According to Korteweg, the Europeans are disappointed in Joe Biden, but the Americans are also disappointed in us. The US because Europe does not want a hard cut with China, Europe because it thought Biden was more European than it now appears. “What Biden is doing is what we accused Trump of doing for a long time. The US doesn’t care much for the WTO, while we in Europe believe that we can maintain the multilateral trading system.’
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Disappointment on both sides
According to Korteweg, Europe not only expected more from Biden, Europe was also surprised by the IRA. And that while Europe always wore out the Biden administration for the whole of Europe-minded. That explains the anger. The American president is only there for the Americans, while we thought: he is one of us.’ Conversely, the Americans are also disappointed in Europe; over the past two years, the Americans had expected European measures that would have made the continent less dependent on China. ‘The Americans expect Europe to follow the US in economic and security matters.’
Exit WTO, enter TTIP 2.0
Korteweg argues for renewed transatlantic trade agreements as we almost had in 2015 with the TTIP agreement. This is to prevent Europe from being crushed by the devastating effects that an Infation Reduction Act can have on the one hand, and on the other hand because the World Trade Organization WTO is bankrupt. At least in American and Chinese eyes.
Korteweg therefore wonders why the EU and the US do not agree on frameworks for a number of sectors such as semiconductors, green technology or, more broadly, for subsidies for their own industries. ‘The WTO is paralyzed, those frameworks no longer function at the international level. Let’s do that bilaterally. This brings us back to a transatlantic trade agreement. The WTO is broken and we have problems with this crazy US state aid, with the risk of our own technology leaking to the US. Shouldn’t we make trade agreements with the Americans then?’
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Have your cake and eat it
Europe’s own ambition to occupy a middle position in the bipolar global playing field is playing tricks on Europeans. ‘We invest a lot in the US, but also in China. We don’t want to choose. as the US wants, for a hard cut in relations with China. We want that Chinese market, that Chinese market is also incredibly innovative. There is a common denominator in Europe: we don’t want to go along with the decoupling rage that is rampant in the US.’
According to Korteweg, Europe can continue to trade with China, ‘without removing the geopolitical fringes of strategic dependencies’. Europe could reduce these unattractive dependencies with regard to raw materials, for example, by investing more in countries such as Japan, South Korea, Singaporte and Taiwan. And thereby substituting the crucial Chinese link in the supply chain.
Beijng divides and rules
Naturally, this will not go unnoticed and China will respond to it. But it actually does that already in its attitude towards Europe. The fact that China is well aware that things are not going well in Europe is evident from the fact that Beijing invites individual European leaders, but not the European Commission. “China is an expert in the divide-and-conquer game. China is very good at emphasizing that Europe consists of a collection of 27 member states instead of one bloc. With this it wants to indicate that China is the largest party.’ According to Korteweg, this is not only an important political signal to the EU member states, but it also leads to confusion in the EU.
According to Korteweg, the attitude of German Chancellor Scholz is exemplary of the fervently desired middle position that Europe wants to occupy. ‘Scholz emphatically distances himself from the image that we are heading towards a Cold War. According to Scholz, we must create a multipolar world in which Europe has an independent voice in relations with both China and the US.’
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Spare cabbage and goat
Scholz is looking for a way in which Germany and Europe can work together with autocratic countries, and at the same time fulfill a bridging function between the US and China and work equally well with all those parties. ‘But China and the US also have a say in that.’ The US wants Europe to show its colors, and American patience is running out. ‘If we do not make far-reaching trade agreements with the Americans about state aid or subsidies, for example, then the law of the strongest and the thickest wallet will apply. We’re going to lose out in that.’
Listen to the entire conversation with Rem Korteweg here