In any case, the decision by Donald Trump to impose even deeper and wider tariffs on imports from China increases the likelihood that China will give even more of a priority to the US. That this serves to prove to all concerned that China only reacts to pressure and sanctions seems lost on China’s leadership.
For the rest of the year, the main interrogation will therefore not be about what China can do for us, but about what we can do for ourselves. Europe has started to fill a new toolbox : investment screening, reinforced anti-dumping and some trade defense instruments (TDIs), envisioning an international procurement instrument (IPI) that would empower reciprocity for public markets. Signing an economic partnership and a free data flow agreement with Japan is also useful. Sharing information on IP theft, tech transfer, and cybersecurity with our main partners does matter. Defensive instruments can again be improved – although dismembering competition law to mirror China’s own distorted economy is not the right approach in the longer term. If it comes down to this, punitive tariffs and full use of reciprocity to deny access to some, while confirming and strengthening Europe’s opening to other like-minded partners, are better ways to serve our future.
What Europe needs in addition to its toolbox is a positive vision, building on our market strength and reliable institutions. The EU is awash with money after years of quantitative easing and bond buy-back. Yet risk capital is scarce, public budgets are tight even in budget surplus member states. Do we really want to live in a low interest trap and the low growth economy that it entails? Europe has deluded itself with the belief that the single market was achieved. One need only to look at the mumbo-jumbo that are railroad standards, the incredible fragmentation of the telecom market, the barriers to banking integration (while new entrants in the web-based economy have fewer obstacles…), and the complete disarray of energy policies to know that the single market is only half done. Funds for innovation, EU financing of infrastructure, joint education and research projects exist, but on a very low scale.