EU Wants to Review New Trade Agreement Between United States and China

European Commissioner for Trade Phil Hogan wants to verify whether the new trade deal between the United States and China complies with World Trade Organization (WTO) rules.

The two economic powers have broken away from the usual international procedure and negotiated bilaterally with each other, without WTO involvement. "So far, the entire agreement is also rather vague," added the Irish EU Commissioner.

Washington and Beijing reached an agreement yesterday on the ‘first phase’ of what is intended to be a broad trade agreement between the two powers. Several reciprocal import tariffs will be lowered, and in return, China will purchase an additional 200 billion dollars worth of American goods and services over two years.

Approximately half of the existing American punitive tariffs on Chinese imports will remain in place until phase two of the trade agreement is finalized. U.S. President Donald Trump says he wants to “keep the trump cards” for future talks. When those phase-2 talks will begin is not yet determined.

President Trump started imposing additional import taxes on Chinese products two years ago, making them more expensive in the U.S. He aimed to encourage Americans to buy more American goods, benefiting domestic companies. Many economists argue that Chinese companies can offer their products cheaply on the world market because they do not comply with various labor rules and environmental agreements and also receive financial support from the Chinese government.

The US and the European Union have battled Chinese state subsidies for several years, but China refuses to make globally binding agreements on this issue. Now that the United States appears to be setting tariff agreements with China outside the WTO framework, the EU faces a choice: either to do the same or to impose higher import penalties on Chinese products.

Commissioner Hogan also voiced substantive criticism of the agreement. He said that several structural reforms the European Union and the United States want to see in China are not addressed. He said these must be on the table during the second phase of negotiations.