Ana Fuentes (Strasbourg) | “I´ve been doing trade policy for the last 14 years and it’s interesting because for the first 13 of those years nobody cared about trade policy and the work I did. All of a sudden it is on everybody’s lips. Everybody speaks trade policy: Brexit, or in the form of China, Trump, steel crisis…,” says Christofer Fjellner, Member of the Committee on International Trade at the European Parliament. He is also, according to his colleagues, one of the greatest advocates of liberalism in the Union.
Q: The new EU trade defense rules have recently come into force, with anti-dumping and anti-subsidy rules updated for the first time in 15 years. Briefly, what changes?
A: One way of explaining it is say that these are the rules Europe can use to prevent companies and other countries from dumping their products in the European market. And dumping in this context is defined as selling cheaper than in their own market. Note that this is legal in Europe. Spain and Sweden are doing it all the time. If we want a chance of selling anything to China we probabily need to sell it cheaper in China than we do in Sweden or in Spain. But if we feel that we are being injured by this, if we feel that these cheaper cheap products threaten our production then under WTO rules we are allowed to impose tariffs. So one part of this is dumping.
The second area is government subsidies. And the third element is safeguards. If we have a certain temporary surge in exports, a boom in exports that was unpredicted and could threaten us one way or another we can use trade defence instruments. For example it is now being used in the context of US steel tariffs. The steel that was supposed to go to the US but does not because of the steel tariffs comes to Europe instead, creating a surge in steel imports in Europe. And in this case we can use safeguards.
What this legislation changes is that it makes it possible to have higer tariffs where the products contain a large proportion of raw materials, wehere cost of the product is highly dependent on raw materials and distorsions. Also, it creates the possibility for better predictability.
Q: You were the visible head of that report but finally voted against it. This is a practice that may sound contradictory from the outside yet it is pretty common in a parliament of 27 countries. Did the text seem decaffeinated to you?
A: Yes but I probably would say that it is decaffeinated in the opposite sense. The problem with protectionism in general is that there is always a winning side and a losing side in Europe. Those who sought protection from these trariffs will problably say that it’s weaker than they hoped for. Those who are paying for the tariffs –importers, consumers- the ones who are actually bearing the burden of this legislation think we are going too far. So this is a compromise for both european perspectives: the producers and the importers. It doesn’t go strongly in any direction but this is the first reform of the trade defence instruments in 25 years.
Q:Is there something from which all European partners equally benefit?
A: The first measure is clearly benefit the ones who produce in Europe and want these higher tariffs. The second one of having pre-information benefits those who import. And the third one I would say will benefit both: you get a quicker process from 15 to 13 months and in certain cases it’s less. And in provisional measures, from 8 months to 6 months. Take the American threats about car tariffs right now. Lots of people say it’s not that interesting because it hasn’t happened yet. The problem is that it doesn’t matter if it happens or not, the threats are there. And who is going to build cars to export to the US now if they could be 25% more expensive when they arrive?
Q:What do you make of Donald Trump’s strategy of withdrawing from all multilateral agreements and negotiating bilaterally?
A: He isn’t negotiating bilaterally, he is threatening everybody and then inviting them to come begging to Washington to get exemptions. Sadly this has been pretty successful so he can keep doing it. The risk from the European perspective is that global trade is agreed between diplomats rather than in the market through competition, and normal rules of trade. Today China promises to start importing more goods from the US to keep exporting steel there. But it does it on the basis of political decisions rather than letting market forces decide what to sell and what to import. If China is going to import more from the US it is likely to import less from Europe.
Europe seems caught in the middle between Trump and China. How should it deal with this changing world?
A: It’s a huge question. On one hand there are lots of opportunities coming to us as a consequence of the US withdrawing from its global role of leadership in international trade. I was fully in favour of the EU doing negotiations for a free trade agreement with Japan, but I honestly didn’t think it could happen anytime soon. Japan is notoriously difficult. But when the US withdrew from TPP the first thing that happened was that the Japanese showed sudden interest in an FTA with their second biggest market. Mexico was a very quick and good agreement. I don’t think it would have been like that if it wasn’t for the US being difficult over NAFTA. There is a space for Europe and we are using that opportunity. If one wants to be critical of the EU, almost all the successes that we have had in trade policy could be connected one way or another to the withdrawal of the US.
The problem is that if anything is to happen globally the EU and the United States have to show joint leadership. And when that is not possible, as we have seen in lots of multilateral negotiations we’ve had like the Trades and Services agreement, or when we hoped to liberalize environmental friendly goods, nothing happens.
Q:In the case of China EU companies have been complaining about the impossibility of doing business for years. How come this is a priority now?
A: It’s been politics but not big politics for many reasons. We have had a big problem with entering the Chinese market but the importance of that market has exploded. It’s the biggest market for most of the biggest growing firms in Europe. And there’s a difference between difficulties entering their market and the measures needed to protect our markets from their competitive threat.
This has been on the agenda for a long time. The difference today is that it’s been made a priority for trade policy. But trade policy in general hasn’t been a priority for heads of states. China has been debated in the context of environmental and other issues but the trade aspect now has exploded. May be it has finally reached critical mass.
Q: Critical mass … and may it also be the increasing Chinese FDI in European strategic sectors? In Portugal, 25% of the electric grid and the largest insurers, among others, belong to Chinese companies. Although it seems that Europeans do not agree on what is strategic.
A: It’s very hard to define what is strategic interest from a political point of view. And the reason for that is of course that a lot of the things that one might call strategic interest might be of commercial strategic interest for one company but on the other hand it’s something completely different when it´s a question of national security, for example. In Sweden we have a huge debate about harbours and telecom infrastructure. That’s a question of national security and defence industry. But on the other hand if you go to certain parts of France they would probably say that food and culture is of strategic interest. We often confuse strategic interest with protectionism rather than national security. Before we are able to make a clear distinction we need to know what we mean by strategic interest. It´s not easy doing that jointly in Europe.
I’m playing the devil’s advocate here, because this is the argument used in both Washington and Beijing: how can the European Union elaborate a commercial strategy with so many voices confronting each other?
It’s always been something in the making, but in some aspects the European Union is more integrated than the US. We have more public procurement rules compared to the US. And you can never commit to more in international trade than the kind of homework you have done and how much you have liberalized internally. Here Europe is really really good. The problem I see is when the rest of the world starts giving up on the idea of free trade and starts to look to manage trade or roll out protectionism. Then Europe has a choice: either to be fragmented and let the WTO-based rules fall apart or to join forces and hopefully stand up for free trade. The worst thing that could happen is that we join what the others are doing.
Several EU countries (including France, Germany and Spain) want Amazon, Google and other American technological giants to pay the equivalent of 3% of their profits on European soil. Does this seem fair to you?
We are in the middle of the journey and haven’t really grasped how dramatic and big the changes are. Amazon is able to optimize their consumers´ experience and thus push down prices compete with traditional and online retailers in Europe. It’ll be tough but it’s for the benefit of consumers and the EU. Nobody is forced to shop on Amazon. What worries me more, if I may say so, is Alibaba. When Amazon enters the European market it plays by European rules and applies the European rule book. Chinese e-commerce is taking bigger and bigger market share in Europe but they have no ambition to play by our rules by any means.
Well if they want to come to Europe they have to comply. Other thing are fiscal loopholes, but other countries are using them too.
The thing today is that they don’t have to come to Europe to have a big part of our market. In Sweden the number of packages that come from China… with products that would not be allowed to be sold in a store due to safety requirements, chemical legislation… The second thing that makes them extremely competitive even compared to Amazon is that they are able to virtually ship goods for free. Today it’s more expensive to send something from the South of Sweden to Stockholm than it is from China due to the universal postal convention, which says that China as a developing country is allowed to send packages practically for free. Today Europe is subsidizing direct sales from China to Europe. That’s unfair competition. And today I wouldn’t be in a position to say that Amazon is unfair competition.
Is Europe working on any strategy to tackle this problem?
It has proven to be extremely complicated. The universal postal convention is from the 1870s. And to change that you need unanimity. China would not accept it. And if Sweden decided unilaterally to charge the Chinese for the transport costs, I wonder how long it would take for H&M, Volvo or other exporting companies to approach the Swedish government and say: Don’t mess with the Chinese.