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EU ill-equipped to face China and US, Brussels trade chief warns

EU ill-equipped to face China and US, Brussels trade chief warns

Cecilia Malmstrom urges tougher collective foreign policy to support business goals

The EU’s trade chief has said the bloc must do more to stand up for its businesses in the face of an aggressive China and a protectionist US, warning that it needs “serious thinking” about how to project its foreign and security goals.

Cecilia Malmstrom said five years as Brussels’ trade negotiator had convinced her that the EU was still ill-equipped to be a strong global power and needed to be tougher, with a more centralised foreign policy and stronger rules to ensure European companies could compete on fair terms with overseas rivals.

“The European Union, for all its successes, is not really equipped to deal with a changing world, with a world order where we have this aggressive China, [where] we have the United States, which is not the traditional strong transatlantic partner,” Ms Malmstrom said.

She pointed to the slow progress of negotiations with Beijing on a treaty to open Chinese markets to European investment as evidence that the EU was not harnessing its political strength in support of its economic goals.

The comments from the outgoing trade commissioner — who describes herself as “a proud liberal” — are a sign of the shifting mood in Brussels.

Ursula von der Leyen, who takes over at the end of the month as president of the European Commission, has vowed to turn the EU into a stronger “geopolitical” actor capable of asserting its common interests. Her preparations have included handing greater powers to Margrethe Vestager, the EU’s top competition enforcer, to regulate the activities of US tech companies.

In a policy agenda closely aligned with Ms von der Leyen’s goals, Ms Malmstrom said the EU’s member states should abandon their national vetoes over EU foreign policy. She embraced, too, plans to make it more difficult for foreign companies to compete for public-sector contracts in the EU if European companies were not offered similar opportunities outside the bloc.

She also urged extensive use of a new EU system to review foreign takeovers — a move sparked by governments’ concerns about Chinese acquisitions of promising European technology companies.

But the comments also reflect the scale of the challenge facing an EU in which national capitals regularly struggle to hold a common line against foreign powers.

There are “differences that exist within the European Union on how to position yourself with China”, she said. “Some are softer, some are harder, some are very dependent.”

Ms Malmstrom is weeks from the end of a mandate that has included some of the biggest crises and successes in EU trade policy, which Brussels conducts on behalf of member states.

She said the WTO, which polices global trade, was in a “crisis” that went far beyond the threat posed by Donald Trump’s protectionist policies.

“The WTO’s crisis is bigger than Trump,” she said. “It’s been hard to make decisions for a long time and some of the criticism the Trump administration is voicing I can fully share.”

As an example of the institution’s deep-rooted problems, she pointed to the fact that “two-thirds of the member states self-define themselves as developing countries and thereby exclude themselves from the obligations that the rest of us have.”

Ms Malmstrom’s first two years as EU trade commissioner were dominated by a popular backlash against trade negotiations with the US and Canada, with Brussels spearheading efforts to make talks more transparent and address concerns that multinational companies could ride roughshod over local regulations.

As she was trying to keep EU trade policy afloat, a storm came from across the Atlantic with the 2016 election of Mr Trump and his mantra that “trade wars are good and easy to win”.

In response Brussels redoubled efforts to strike deals with countries Ms Malmstrom often describes as “like-minded friends”, in a bid to reinforce the international trading system. The EU signed the world’s largest bilateral trade deal with Japan and concluded 20 years of talks with the South American Mercosur bloc.

However ratification of the Mercosur deal faces entrenched opposition from farmers and from a public opinion outraged by Brazilian president Jair Bolsonaro’s failure to protect the Amazon rainforest, violating international climate commitments.

“Brazil has to do what Brazil has promised,” Ms Malmstrom said. “Of course, if they don’t, I see this being very hard to ratify.”

Jim Brunsden Sam Fleming and Alan Beattie

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