America Last? EU says Trump is losing on trade

[January 16, 2018]  By Philip Blenkinsop and Noah Barkin

BRUSSELS (Reuters) - The European Union's trade tsar has no idea what Donald Trump will tell his audience at the World Economic Forum in Davos next week, but she is clear what the EU's message to the U.S. president will be.

America is shooting itself in the foot by withdrawing from global leadership on trade, Cecilia Malmstrom, the 49-year-old Swede who has served as Europe's trade commissioner for the past three years, told Reuters.

Under Malmstrom's direction, the EU has juggled a dizzying array of trade talks over the past year. In July it clinched a preliminary deal with Japan. And early this year it hopes to seal agreements with Mexico and the Latin American Mercosur bloc.

The retreat of the United States under Trump has played a big role in this push, Malmstrom says. Countries around the world are desperate for new trading partners, and the EU, confident again after years of economic crisis and Britain's vote in 2016 to leave the bloc, has eagerly filled the gap.

"We have shown that we have overcome that acute crisis, so many countries are turning to Europe for leadership and for partnership," said Malmstrom, who will also be in Davos.

"With other countries we are now setting the standards and that is also why it is bad for the U.S. to withdraw because there are standards set now and they will be global."

Since coming into office one year ago on a promise to put America first, Trump has pulled Washington out of the Trans-Pacific Partnership (TPP), threatened to scrap the 90s-era North American Free Trade Agreement (NAFTA) and to introduce steel tariffs that could hit European allies as well as China.

But Malmstrom singled out Washington's confrontational stance towards the World Trade Organization (WTO) as particularly worrying.

The Trump administration has blocked the appointment of judges to a WTO body that rules on trade disputes. If the United States does not shift its stance, that body could cease to function altogether, Malmstrom said.

European Trade Commissioner Cecilia Malmstrom speaks during an interview with Reuters at the EU Commission headquarters in Brussels, Belgium, January 15, 2018. REUTERS/Francois Lenoir

She described a WTO ministerial meeting in December as a "disgrace". The meeting in Buenos Aires failed to reach any agreements, such as on ending fishing subsidies, and descended into acrimony, in the face of stinging criticism from the United States.

"We want American leadership in the world. They shouldn't disengage," Malmstrom said.

Trump will be the headliner in Davos one year after Chinese President Xi Jinping traveled to the ski resort in the Swiss Alps and signaled a readiness to assume a leadership role in free trade created by an inward-looking Washington.

Malmstrom described the Xi speech as "brilliant" in terms of content and timing - just three days before Trump's inauguration.

But she said there had been no change in China's behavior towards Europe since then. If anything, the hurdles to European investment in China have grown.

The EU seemed to have gained a free trade ally in the world's second largest economy, but Malmstrom said Beijing had not backed up Xi's speech with action.

"Maybe he really believes in these things, but we haven't seen it yet in China," she said.

"We want to work in China and we want China to invest here, but the level playing field is not there. We haven't seen anything concrete in our trade relationship."

(Editing by Peter Graff)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.