{"id":32850,"date":"2025-06-30T11:37:08","date_gmt":"2025-06-30T11:37:08","guid":{"rendered":"https:\/\/financialrush.com\/?p=32850"},"modified":"2025-06-30T11:37:08","modified_gmt":"2025-06-30T11:37:08","slug":"the-eus-plans-to-change-the-world-will-fall-short","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=32850","title":{"rendered":"The EU\u2019s plans to change the world will fall short"},"content":{"rendered":"

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This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here<\/a> to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters<\/p>\n<\/div>\n<\/div>\n<\/div>\n

After two weeks in which this newsletter didn\u2019t kick off with Donald Trump, I get sucked in like a rowing boat being inexorably pulled into a frothing whirlpool. Trump abruptly announced he was stopping talks with Canada<\/a> late last week over the country\u2019s digital services tax, which caused Ottawa rapidly to rescind it<\/a>. A deal with the EU<\/a> may, or may not, be imminent. At any rate, the administration increasingly seems to accept<\/a> that the alleged July 9 \u201cdeadline\u201d to agree farcical \u201cdeals\u201d to forestall its bogus \u201creciprocal tariffs\u201d \u2014 note every noun of Trump\u2019s trade policy requires derisive quote marks and a sardonic adjective \u2014 is not a deadline at all. <\/p>\n

At least I\u2019m managing to keep Trump (at least explicitly) out of today\u2019s main pieces, which are about the EU coming out with some odd stuff on what it wants to do about global trade governance and the froideur between Brussels and Beijing. Charted Waters,<\/strong> where we look at the data behind world trade, is on stock prices.<\/p>\n

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Get in touch. Email me at alan.beattie@ft.com<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n

Von der Leyen goes out on a limb<\/h2>\n

The considered Trade Secrets view of Ursula von der Leyen\u2019s European Commission and of the president herself, assuming I\u2019m required to have one, is that she\u2019s been generally quite sensible, if not spectacular, on trade. Occasionally, though, she gets a rush of blood to the head, and promises something inadvisable and\/or impractical. One example was her first meeting with Trump back in 2020, in which she promised a quick-fire deal \u201cin a few weeks\u201d<\/a> on trade, energy and technology. That occasioned some raised eyebrows, if not spitting of coffee, in the Charlemagne building occupied by the trade directorate in Brussels.<\/p>\n

Predictably it came to nothing. Nor, almost certainly, will her quixotic claim last week<\/a> that the EU was working on reforming or even replacing the World Trade Organization. German chancellor (and fellow Christian Democrat) Friedrich Merz went further, explicitly wondering if the EU could work with trading partners to create something that, and I quote, \u201cinstitutionally replaces what we actually already envisioned with the WTO, namely a dispute settlement mechanism through an institution like the one the WTO was supposed to be\u201d.<\/p>\n

I\u2019m going to go out on a limb (in my view, a relatively short and sturdy one) here and say this is unhelpful freelancing that isn\u2019t going to happen. Here\u2019s why.<\/p>\n

The vehicle of change von der Leyen and others have mentioned is co-operation between the EU and the Asia-Pacific CPTPP pact, about which there has been a whole lot of chatter in recent months. This chatter has got ahead of reality, as people inside the CPTPP have noted to me. I\u2019m told that all that\u2019s practical between the EU and CPTPP at the moment is a restatement of the principle of adherence to WTO rules, especially since no one really wants to break cover and enrage Trump.<\/p>\n

Apart from obvious big differences in approach on certain issues (food safety, data transfer), the CPTPP and the EU are legal behemoths with their own rule books and dispute settlement systems, practised and honed in the EU\u2019s case and barely tested in the CPTPP\u2019s. Even if you somehow got them substantially docked with each other, you\u2019d have a governance structure excluding certainly India and very probably China. (That is, unless China acceded to the CPTPP in the meantime, which various CPTPP members are chary of and which would certainly liven up negotiations with the EU.) Global trade governance without the US, China and India isn\u2019t quite Hamlet<\/em> without the prince, but it\u2019s certainly Waiting for Godot<\/em> without three out of Estragon, Vladimir, Pozzo and Lucky \u2014 and with a similar, indefinitely postponed resolution.<\/p>\n

More fundamentally, an attempt to complement or supersede the WTO will founder on the same problem the WTO itself has. If big trading powers don\u2019t want to make rules in vital areas and adhere to them, it doesn\u2019t matter what structure you create. If India refuses point-blank to discuss environmental issues in the WTO, it\u2019s not going to join a new gang to do so. (Admittedly, it wouldn\u2019t be able to block plurilateral deals being adopted as it does inside the WTO. But it would be a tricky thing to create legally binding plurilaterals outside it.)<\/p>\n

If China wants to use its leverage over rare earths supply unilaterally, it won\u2019t accede to a multilateral framework to constrain it. China loves the WTO, but largely because it enables it to strike multilateralist poses without actually having its state-capitalist system constrained very much by the rules.<\/p>\n

Proposing some fundamental reforms, or indeed a new WTO, means we\u2019re back with our familiar old pal, \u201ctechnocratic solutions to political problems\u201d. It\u2019s a discourse which has occupied thousands of hours of earnest seminar discussions and millions of words of think pieces and op-eds over the decades, but not really got anywhere. Anyway, in one minor way the WTO system got a boost last week when the UK decided to drop its slightly tedious performative reluctance and join the Multi-Party Interim Appeal Arbitration Arrangement (MPIA)<\/a>, the workaround WTO appellate body set up after the US paralysed the real one. Well done Britain. Nice to see you made it.<\/p>\n

The froideur between Brussels and Beijing<\/h2>\n

Meanwhile, back in the world of realpolitik, another of von der Leyen\u2019s interventions earlier this month was to be pretty cross with China<\/a>. She\u2019s an instinctive Atlanticist and China-sceptic, and so Beijing\u2019s recent behaviour has given her a chance to give at least the second of those tendencies free rein. Nearly three months after China announced it was restricting rare earths exports<\/a> \u2014 and these constraints are a lot more binding<\/a> than previous ones \u2014 it\u2019s increasingly hard to argue that the EU has been accidentally caught up in the blast, rather than being a secondary target along with the primary mark, the US.<\/p>\n

Yes, China prioritised suppliers to Volkswagen for those precious licences, but it has also subjected European and US companies alike to extraordinarily invasive demands<\/a> for information. The country is trying to portray itself as constructive and multilateralist<\/a>, but that\u2019s convincing no one in Brussels. This recent piece<\/a> from the South China Morning Post details how China\u2019s charm offensive in the EU failed to work.<\/p>\n

If Beijing is trying to peel the EU off from alliance with the US, it\u2019s not doing a good job of it. If it\u2019s true the US and China are trying to corral countries into their geoeconomic herd, they\u2019re both doing so mainly with sticks rather than carrots.\u00a0<\/p>\n

At this rate, the EU-China summit in July is likely to be quite a tense affair. The EU has started to deploy its new range of weaponry against China \u2014 the international procurement instrument<\/a> and the foreign subsidies regulation \u2014 and it\u2019s always on the alert for a good opportunity to use the anti-coercion instrument (ACI), which really would be a big deal.<\/p>\n

Again: we are not in a new bipolar cold war. Instead it\u2019s a pattern of shifting and divided allegiances, with the big powers frequently prioritising immediate self-interest rather than the careful construction of alliances. It\u2019s going to be an interminably bumpy ride.<\/p>\n

Charted waters<\/h2>\n

Who knows what\u2019s driving financial markets these days? (Do they think there won\u2019t be big new tariffs? Do they think the economy will do OK regardless?) Anyway, the big funk in US equities relative to European stocks is now all but over.<\/p>\n

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Trade links<\/h2>\n