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Ursula von der Leyen wants the EU to cooperate with a Pacific trade group of 12 countries. This could serve as a new platform for supporters of rules-based trade…
Europe is getting fed up with Donald Trump's trade threats, while considering a bold move to look east instead of west, to find partners who want to play by the rules.
Trump's unilateral and arbitrary tariffs, which could rise to 50 percent from July 9 if EU and US negotiators fail to reach a trade deal, have tested the patience and determination of EU chief executive Ursula von der Leyen.
Its answer? Join the CPTPP, a Pacific-focused trade group that includes like-minded countries like Japan, Australia, Canada and Mexico.
Among them, the 39 EU countries and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership account for 30 percent of world trade. Forming a coalition of the willing could mark a first step toward reconfiguring the international trading order and escaping the institutional paralysis that is plaguing the World Trade Organization.
In a speech to EU leaders, von der Leyen turned earlier comments about possible cooperation with the CPTPP into a fuller reality. The new grouping would redesign global trade rules, she said, reforming or perhaps even replacing the global trade rules body.
Such a plan would “show the world that free trade with a large number of countries is possible on a rules-based basis,” von der Leyen said after an EU summit on Thursday evening. She added that this is a project that I think we should really engage in, because the CPTPP and the European Union are strong.
But how can the formation of such a coalition of the willing work?
One idea would be to make an early pledge to uphold established multilateral trade rules, veteran trade negotiators Tim Groser, Steve Verheul and John Clarke said in an exclusive commentary shared with Politico.
Groser, a former New Zealand trade minister; Verheul, previously Canada's chief trade negotiator; and Clarke, until recently a senior EU trade negotiator, said the 39 EU and CPTPP countries should, as a first step, commit to a "Suspension Agreement" to keep their markets open to each other.
“What this would do is send a massive signal to Washington that a very significant portion of the global economy, including almost all of the United States’ traditionally closest partners, remains committed to the rules-based system,” they said.
The US had the opportunity to join the CPTPP, formerly known as the Trans-Pacific Partnership, during the Barack Obama administration. But Trump withdrew in 2017 after taking office for the first time, before the pact was finalized.
When asked on Thursday whether the US would join the new initiative between the EU and the CPTPP, von der Leyen replied: "As far as I understand, the Americans left at a certain point. It will be up to the two blocs to decide whether they want to let them in."
Ignacio García Bercero, a former EU chief trade negotiator, believes that the potential partnership should not close the door on the Americans just yet, nor should it be seen as a move to antagonize Trump.
However, "if the US is not ready to join because it does not believe that the solution to these problems is rules, others will have to move forward without the US."
The United Kingdom has also led efforts as a new member of the CPTPP to welcome the EU's stance to strengthen ties between the two potential partners.
"I've spoken to leaders in Japan, in Singapore, in Australia, New Zealand, Canada, about how we, the United Kingdom, can trade in an easier and better way with them, if we as a group of countries can trade with other countries in an easier and better way," said Prime Minister Keir Starmer, as he launched the United Kingdom's first Trade Strategy since Brexit on Thursday.
These countries are all members of the Asia-Pacific bloc, which the United Kingdom joined in December.
Starmer's government has been open to the idea of the bloc and the EU working together. "I think it's a difficult environment, but there's significant opportunity if we're nimble about it, if we understand the world we live in and get ahead of it," the prime minister told businesses at the launch of his Trade Strategy in Westminster.
If the EU and the CPTPP can create a new community of values and interests, this could serve as a basis for addressing the trade challenges that have accumulated since the WTO's founding 30 years ago, but which it has been unable to resolve because the Geneva-based trade club works by consensus and its largest member, the US, does not accept this.
“This should start outside Geneva with a group of countries that can move more decisively,” Groser, Verheul and Clarke argued. “In the medium term, we argue that this grouping can be a focal point for developing new rules and commitments for a trading system that can deliver sustained growth and prosperity for their peoples.”
Von der Leyen is already urging leaders of CPTPP countries to launch a dialogue "as soon as possible."
“To be clear, the EU is not joining the CPTPP as such, but we are building bridges between the two blocs,” the official said, speaking on condition of anonymity as is customary in Brussels, ahead of the EU summit. /Adapted from Politico/
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