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EU, US flags and a traffic sign showing Donald Trump
Image: Imago/Ralph Peters

Free trade needs smart solutions

March 30, 2018

Donald Trump may not always be aware of the consequences of what he says and does. But the debate he has triggered with his comments on free and fair trade could be helpful to bring about change, says DW's Henrik Böhme.


They must still be milling around in some drawers. I mean all the thousands of pages written during the stalled negotiations between the EU and the US on a trans-Atlantic free trade agreement (TTIP). It's a deal that didn't come about, because for the leftists, environmentalists and do-gooders, TTIP symbolized the ugly face of neoliberalism.

Now the fat's in the fire as the US mulls higher tariffs on imports from Europe. After lashing out at unfair trade practices and bad treaties with Mexico, China and the EU, US President Donald Trump has stepped into action.

One might feel inclined to say that the man in the White House has only had his backers and voters in mind, whom he promised to make America great again. Indeed, it may probably be wrong to suggest a global strategy behind his behavior. Donald Trump doesn't seem to care a lot about what his actions or words mean to the rest of the world.

You simply have to live with that, like it or not. And you have to try and make the best of it. He's the one we need to talk to as there's no replacement in sight in the White House mid-term.

What is protectionism?

Identifying the positive aspects

Let's look at the bright side of life. South Korea, for instance, has managed to strike a deal with the Trump administration. The existing agreement was renegotiated. The upshot of it all was that the South Koreans are going to export less steel and open up their market a bit more for American cars (which hardly anyone is interested in buying in the Asian nation anyway). If that's all it takes to please Donald Trump, that deal may well serve as a blueprint for the Europeans.

The equation is simple. On average, the US levies tariffs of 2.5 percent on imports from the EU, while the European Union slaps an average of 3.5 percent on imports from the US. Why not meet in the middle, or better still, do away with the tariffs altogether. After all, that was one of the objectives laid down in the TTIP draft. That's why they should get those documents out of the drawer again, at least the chapters on trade barriers.

Let's be pragmatic

Isn't it a joke that Donald Trump doesn't really hold the World Trade Organization (WTO) in high esteem, but then sends a team to the WTO headquarters in Geneva to file a complaint about China's handling of intellectual property and patents? It looks like the WTO has a role to play after all in the present-day world of trade.

DW business editor Henrik Böhme
DW business editor Henrik Böhme

The US president, be it on purpose or not, has triggered another debate about the need for reforming the global trade body, with potential changes having been shelved after the failure of the Doha round of talks. Let's not forget that a final agreement was not reached, because the then US president, Barack Obama, didn't want any such accord.

The Germans in a bind

Donald Trump for his part has granted the Europeans some breathing space in the conflict over higher tariffs on steel and aluminum. But in five weeks from now, he wants to hear from them again. In the meantime, he's been homing in on the Chinese, with whom he's supposed to bring about a big peace deal for the Korean Peninsula. Only he will know how the two things will go together.

But one thing's for sure. The Germans are now finding themselves between a rock and a hard place. They love to make brisk business with both China and the US. Taking sides in this conflict will eventually feel like having made the wrong decision, no matter what you do. Doing business in the US is often a lot easier, especially for Germany's small and medium-sized enterprises. Big companies such as carmakers BMW and Mercedes are seen as welcome investors.

Trump's China tariffs are a threat to European businesses, economists warn

By contrast, doing business in China can be so much harder. It's also a different culture that has kept many German entrepreneurs from investing in the Asian nation. And despite Chinese President Xi Jinping claiming the opposite and appearing as a staunch supporter of free trade, there have been increasing signs of more state control standing in the way of a real market opening.

Like other foreigners, German firms have to worry about the protection of their technology and data as well as about a non-level playing field for domestic and foreign market players.

Don't expect a quick fix, and don't expect a cure-all in this complicated situation. It'll probably be best to give Donald Trump what he wants, and that wouldn't be a big deal as indicated above.

At the same time, German exporters would be well-advised to look for alternative trading partners. Why not shift the focus to Africa? And I'm not only talking about Africa as a recipient of German goods, but also as a destination for more long-term investment. African nations are no doubt a difficult market. But if Germany is serious about fighting the root causes of mass migration, wouldn't that be a smart solution?

Game of trade — playing global commerce

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