Dangerous changes are ahead for world trade

Dangerous changes are ahead for world trade

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If the trade dispute between the United States and China is aggravated, German companies would also be affected, says Ilja Nothnagel.

In recent days, the world trade policy has undergone many changes. In the World Trade Organization (WTO) there is a dangerous dead time. When President Trump took office, the German economy saw with concern the special attention of the United States in the system of regulation of world trade. 

The United States against the rest of the world?

In trade policy, the slogan “America First” has become a bitter reality, which also harms the United States.With the tariffs on steel and aluminum, the United States is embarking on a dangerous path. NATO, like Germany and Britain, jeopardize the security of the United States with its steel production, and the reference to a WTO clause for national security seems too artificial and doubtful, which could even shake the world trade order. In principle, it seems that it was worthwhile for the EU Commission and the German government to come together in Washington, and the provisional exhaustion of EU tariffs is a small victory, a respite of five weeks.

The conflict increases

But the danger of a commercial war has not yet been cleared. On the contrary: Trump has announced to increase by at least 50 billion dollars a year, 25%, the tariffs on Chinese products. The reason lies in an investigation into the theft of intellectual property and the technology transfer forced by China. The list of products covers, among other things, space technology, communication and information. This is the great theme of the discord between China and the United States.

Even if the conflict only took place between these two great powers, the German companies would not be left out, because they are present in both markets, either with franchises or joint commercial operations.

Tariffs and protectionism among the economic giants would completely affect German companies. So far, China has reacted calmly, but since Beijing will not see with folded arms how to apply more restrictive measures from the United States.

The world trade order is at stake

But there is hope: tensions could serve to intensify negotiations on the acceptance of global regulations. We have to continue dialoguing in times of value chains and distribution. The world economy and our international German economy need reliable and effective rules that only the WTO guarantees. With nineteenth-century national measures we will not be able to achieve the global challenges of this century: to expand global value chains. Trump’s hasty actions destroy trust. In world trade, the law of the strongest must not prevail.  

We have to have something very present: in the debate it becomes clear that China’s role in world markets is now being questioned. The opening of the country advances in some aspects, forced business cooperation, data protection, but there are also many issues to discuss.

That is to say that there is really enough to do to improve our common economy based on global norms. We need fewer tariffs and trade barriers in the world and more common rules of the game, which contribute to fair and effective trade.

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