Draghi advises EU to exercise caution in their trade conflict with China
After the trade disagreement with China, the ex-President of the European Central Bank (ECB), Mario Draghi, urged the EU to take a "careful" route. "We're not like the US, we can't build a trade barrier," Draghi stated in Brussels on Monday, alluding to the US that has enforced severe trade limits on Chinese imports.
The EU is way more reliant on international trade than both the US and China, and thus, needs to proceed "extremely carefully, issue by issue," Draghi underscored. Since its economy is largely open, the EU would likely experience the effects of a full-scale trade war more severely. The objective should be to reestablish balanced trade terms - for instance, when the industry gets unfair advantages due to excessive subsidies or state-controlled corporations.
The EU Commission suspects various things, such as China providing an unfair edge to its car manufacturers through subsidies. This Friday, EU nations are expected to vote on a Brussels proposal to levy tariffs as high as 36.3% on electric vehicles from China. As a reference, US President Joe Biden declared tariffs of 100% on Chinese electric vehicles in May.
China, however, retaliates by threatening tariffs on dairy and meat products from Europe in this trade dispute with the EU. Both sides have escalated the issue to the World Trade Organization (WTO) regarding the implied tariffs, but negotiations for a compromise have yet to yield results.
The EU needs to adopt a strategy that considers the potential impact on other sectors, as retaliatory tariffs from China could harm European dairy and meat producers. Moreover, it's crucial for the EU to address instances of 'other' industries, like car manufacturing, receiving unfair advantages through excessive subsidies or state-controlled corporations.
