EU should brace for U.S. standoff over China, ex-WTO
chief warns
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[October 30, 2018]
By Laurence Frost and Clara Denina
PARIS (Reuters) - The European Union should
prepare for its companies to be targeted by American sanctions in a
worsening trade dispute between the United States and China, former
World Trade Organisation (WTO) director general Pascal Lamy said on
Tuesday.
As they weigh up a response to renewed U.S. sanctions against Iran,
which have forced an exodus of European companies, EU governments should
consider the prospect of similar extraterritorial measures penalizing
China trade, Lamy told an international investment conference in Paris.
"If the U.S. were to step further in not only hitting China with trade
measures but with sanctions, if they were to deal with China the way
they did with Iran, then we would all have a big problem," he said.
"That's why we need to have a careful look at what will happen in the
case of Iran."
A surge in global protectionism from Brexit to the U.S.-China trade war
has done little to dent foreign direct investment flows overall,
according to data presented to the XBMA conference on cross-border
mergers and acquisitions.
The global volume of M&A deals is projected to rise 26 percent this year
to $4.34 trillion, its second-highest annual total since 2007, the eve
of the last major financial crisis.
Chinese investors accounted for a record 20 percent of European inbound
deal volume last year as some turned their attention away from the
United States. Europe-China trade is also expected to benefit from
increased U.S.-China tariffs and other barriers.
The Trump administration in May withdrew Washington from an
international agreement to curb Tehran’s nuclear activities, and imposed
new sanctions against Iran. That triggered the mass withdrawal of
European companies from carmakers to oil majors, in order to avoid
crippling U.S. penalties reintroduced in stages on Aug. 6 and Nov. 4.
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Pascal Lamy, former World Trade Organization Director-General,
speaks during an interview at the Reuters Russia Investment summit
in Moscow, Russia, September 30, 2015. REUTERS/Maxim Shemetov
European governments have pledged in response to establish new financing
channels that shield companies from U.S. sanctions, but a viable program has yet
to emerge. The comments by Lamy, who served as EU Trade Commissioner before
heading the WTO, expanded on recommendations published in a policy paper
http://institutdelors.
eu/publications/leurope-face-aux-sanctions-americaines-quelle-souverainete/?lang=en
last week by the Jacques Delors institute, a European think-tank.
Europe could create its own extraterritorial mechanisms to sanction breaches of
environmental, data protection, tax and anti-corruption laws, according to the
paper co-authored by Lamy and four others including Louis Schweitzer, honorary
chairman of carmaker Renault <RENA.PA>.
Failing that, Brussels could use existing directives to halt the EU activities
of foreign banks "from a third country that imposes extraterritorial provisions
on EU companies", it said.
"It cannot be ruled out that the United States will impose future sanctions on
China that go beyond the current trade measures initiated by the American
president, which could then be applied extraterritorially," the paper added.
"Perhaps it would be wise to take decisions for the Iranian case by considering
this wider economic and political context."
(Reporting by Laurence Frost, editing by Ed Osmond)
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