The Response of the European Union to President Trump’s
Protectionist Trade Policies
Name: Hidde Marten Douma Student number: 12301485 Supervisor: Dr. S. Krapohl
Programme: MSc Political Science: International Relations Date: 21-06-2019
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Table of Contents
Introduction ... 3 1.1 Context ... 3 1.2 Social Relevance ... 3 1.3 Academic Relevance ... 4 Literature Review ... 5 2.1 Trade Wars ... 52.2 Theories in International Relations: Realism ... 6
2.2.1 Krasner’s Theory of State Power and the Structure of International Trade ... 6
2.2.2 Gilpin’s State-Centric Realism ... 8
2.3 Theories in International Relations: Liberalism ... 9
2.3.1 Ricardo’s Theory of Comparative Advantage ... 10
Theoretical Framework ... 12 3.1 Theoretical Difficulties ... 12 3.2 Theoretical Framework ... 12 3.3 Realism ... 13 3.3.1 Balance-of-power Theory ... 13 3.3.2 Balance-of-threat Theory ... 16 3.4 Liberalism ... 17 3.4.1 Neoliberal Institutionalism ... 18 Hypotheses ... 20 Methodological Framework ... 21
Economic Balancing of the European Union ... 22
6.1 A Short History of EU-US Trade Relations... 22
6.2 The Recent Trade Dispute between the United States and the European Union ... 24
6.3 The Future of EU-US Trade Relations ... 26
6.4 A Short History of EU-China Trade Relations ... 29
6.5 The EU-China Relations in Regards to Trump’s Protectionist Policies ... 31
Security Balancing of the European Union ... 35
7.1 The North Atlantic Treaty Organization (NATO) ... 35
7.2 EU-US Security Relations and the Question of Balancing ... 37
7.3 EU-China Security Relations and the Question of Balancing ... 41
The Role of the World Trade Organization ... 44
8.1 The World Trade Organization (WTO) ... 44
8.2 The History of the EU’s Compliance to WTO Rules ... 44
8.3 The Recent Trade Dispute: WTO Case DS548 ... 46
Conclusion ... 47
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Introduction
1.1
Context
On June 16, 2015, Donald Trump announced he would be running for president of the United States (US). His speech was memorable because of some surprising statements. The most memorable moment was when he called Mexicans “rapists” and criminals who traffic drugs across the border (Gambino & Pankhania, 2016). Trump made a lot of controversial
statements during his campaign. On trade he said that he wanted a 45 percent tariff on Chinese exports to the United States and a 35 percent tax on cars crossing the US-Mexico border. He thought this would bring back jobs to the United States (Becker, 2016). On January 20, 2017, Donald Trump took office as the 45th president of the United States of America (McGwire, 2017, p. 69). The United States imposed tariffs on European steel (25%) and aluminum (10%) in June 2018 (Swan, 2018; Makowska & Wąsiński, 2018). The
European Union (EU) then imposed retaliatory tariffs. In July 2018, the President of the United States, Donald Trump, and the President of the European Commission, Jean-Claude Juncker, announced that they wanted to negotiate an agreement so that an escalation of the trade war could be avoided. However, the United States has announced that they are
investigating whether it is possible to impose new tariffs of about 20-25% on the European automotive sector. The protectionist measures that the Trump administration has
implemented threaten the relations of the European Union with the United States (Makowska & Wąsiński, 2018). These events are interesting because an escalating trade war between the United States and the European Union can have huge consequences for both the United States and the European Union. It is important to understand how the European Union reacts to these threats in order to expand the current knowledge on trade wars in the 21st century.
Also, the relationship between security dependence and economic policy will be examined. The relations of the European Union with the United States and China, as its largest trading partners, will be closely examined in order to find out in what way the current relationship has changed and how the European Union reacts to American protectionist policies. This thesis will focus on the question: “How does American protectionism during the Trump
administration influence trade policies of the European Union?”
1.2 Social Relevance
Trump’s trade policies have dominated the economic news, targeting both China and the European Union. While the European Union has imposed retaliatory tariffs it is still not very clear whether the EU is planning to cooperate with President Trump to resolve the trade issues or whether the EU is planning to look for other trading partners with which they can
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intensify trade to compensate for the losses. Both European and American citizens will feel the consequences of a trade war between the EU and the US. Therefore it is highly relevant and important to do research on this particular trade dispute. Also, if the European Union decides to intensify trading with other states instead of the US, this would have huge
consequences for the current balance of power. This would also have a direct impact on the lives of people in the EU and the US and it is therefore important to understand what exactly is going on during the current trade dispute between the EU and the US.
1.3 Academic Relevance
There is also a high degree of academic relevance. By testing two hypotheses which are based on different theories in regards to balancing and one hypothesis which is based on neoliberal institutionalism, this research can add to the knowledge of these theories. While balancing theory is part of the realist school and neoliberal institutionalism is part of the liberal school this research can also add to the knowledge of these two main theories. It is interesting to look which theory will be useful to explain the case. Since the EU and US economies are roughly equal in size it is very interesting to see how the trade dispute unfolds and how the European Union will adjust its policies. Also, since the EU and US are currently both economic and military partners, it is relevant to understand what exactly the role of security dependence is on the EU when they make certain decisions on trade policy.
Academics have always tried to find out when liberalism or realism is more useful to explain state behavior in the international realm. It is therefore justified to test assumptions of both theories in the situation of a trade dispute between two large economies. Also, this kind of protectionist policy between the European Union and the United States wasn’t really common in the 21st century until the recent events. This makes the topic more interesting because the recent trade dispute has not yet been analyzed in great depth.
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Literature Review
2.1 Trade Wars
It is essential to understand what a trade war is exactly and how the actors who are involved act when a trade war happens. When trade wars occur states want to achieve economic objectives which are related to the traded-goods sector of their economy. They try to achieve these objectives by placing restrictions on the flow of goods and services to, and from, other states (Conybeare. 1985, p. 147). Trade wars are an old phenomenon. Conybeare (1985) even analyzes the Anglo-Hanse trade war which transpired between the 14th and the 17th
centuries. When trade wars happen negotiations between the states in conflict often take place. Two different scenarios are possible. The first scenario is that there is a
non-cooperative context, where states don’t solve their trade disputes through diplomatic means, and the second scenario is that there is a cooperative context, where states solve their trade disputes through diplomatic means (Harrison & Rutström, 1991, p. 420). Harrison & Rutström (1991) have created a hypothetical situation where there is a non-cooperative game between the United States and the European Union. Both states have two options: to keep (K) the protectionist structures in place or to abolish (A) the protectionist structures on the trade flow from, or to, the other state. The payoffs that are shown in the table represent the annual welfare impact compared to the status quo (Harrison & Rutström, 1991, p. 420).
Figure 1.
Welfare Payoffs in a Bilateral Liberalisation Game
Note: Reprinted from Trade Wars, Trade Negotiations and Applied Game Theory, by G. W. Harrison & E. E. Rutström
When the European Union decides that it wants to keep its protectionist trade barriers in place the United States would also keep its protectionist trade barriers in place in order to prevent a negative impact on its annual welfare. However, when the European Union decides that it wants to abolish its protectionist trade barriers it would be wise for the United
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States to abolish its protectionist trade barriers as well. When the United States keeps its protectionist trade barriers in place there will also be a positive impact on its annual welfare, but when it abolishes its protectionist trade barriers the positive impact will be greater. It is thus clear that one cannot simply make predictions on what will happen during a trade war without knowing what the other state will do. In this particular game the dominant strategy for the European Union is to keep its protectionist trade barriers in place. It is therefore likely that the United States, in this hypothetical situation, will also keep its protectionist trade barriers in place (Harrison & Rutström, 1991, pp. 420-421).
2.2 Theories in International Relations: Realism
The first theory, realism, is based on four main propositions. The first proposition is anarchy. This means that there is no central government in the international realm and that states are therefore the highest political entity possible. The second proposition is egoism. Everyone, both groups and individuals, pursues self-interest. The third proposition is groupism. This means that politics takes place within and between groups. The last proposition is power politics. The last proposition is actually a combination of the previous three propositions because it means that the egoistic groups interact in an international realm of anarchy which generate politics of power and security (Donnelly, 2008, p. 150; Wohlforth, 2008, p. 133). International politics is therefore a realm of power and interest. Because human nature is at its core egoistic, one should expect that mankind is inclined towards immorality. Not all realists agree that humans are not capable of acting in a moral way, but they do agree that primary emphasis should be given to egoistic passions and the presence of evil in political action. Humans organize themselves in groups for purposes of conflict and therefore conflict is inevitable. Within states there is some form of hierarchy which tames human nature, but in international relations there is only anarchy that allows the worst aspects of human nature to be expressed. There is thus always a struggle for power and security. Universal moral principles cannot be applied to states and their actions (Donnelly, 2004, pp. 9-11).
2.2.1 Krasner’s Theory of State Power and the Structure of International
Trade
First it is useful to understand how realists look at the economic aspect of the international system. Krasner has an interesting view on the state and its role in international trade. While his writings are quite old it is useful to present them here because it is clear that President Trump wants to maximize national goals through power politics. This is fully applicable to the writings of Krasner. According to Krasner, students of international relations have
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until it has virtually ceased to exist as an analytic construct (Krasner, 1976, p. 317).” He notices a trend where students are undermining the basic conventional assumptions. They now believe the state is trapped by a transnational society which states do not fully control. Interdependence is, according to this view, then a result of elements beyond the control of sovereign states or a system which is created by states. Krasner does not agree with these new views and introduces the state-power theory. The structure of international trade is shaped by states who are trying to maximize national goals (Krasner, 1976, p. 317). Krasner builds up his argument by relating the four basic state interests, which are aggregate national income, social stability, political power and economic growth, to the degree of openness for the movement of goods. The potential economic power of any state determines this
relationship. Potential economic power is the relative size and the level of economic
development of any given state. Krasner then relates the distributions of potential power, like the hegemonic or multipolar distribution of power, to the different international trading
structures. An open trading structure would be highly likely under a hegemonic distribution of potential economic power (Krasner, 1976, p. 318).
It is important to relate the distributions of potential economic power, which is defined by both the size and the level of development of any particular state, to the international trading system structure. This can be defined in terms of openness (Krasner, 1976, p. 321). Krasner then creates a table to show the probability of an open trading structure. He takes the
differences in distribution of potential economic power into account. This table can therefore be used to predict how the trading structure between two states will look like (Krasner, 1976, p. 323).
Figure 2.
Probability of an Open Trading Structure with Different Distributions of Potential Economic Power
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The international trading system is formed by both institutional and behavioral attributes. The policies which states enact on for example trade barriers influence the degree of openness, but also the flow of goods. These two are related but are not exactly the same (Krasner, 1976, p. 323). Scholars often look at the periods in history where tariffs were lowered to explain openness. This is the first indicator to look at the degree of openness in the
international trading system. According to Krasner, however, tariffs alone are not sufficient enough to explain openness in the international trading system. It is not true that tariffs have to be high to be effective. Low tariffs are also able to significantly lower the amount of international trade, as long as cost functions are close to being identical. Also, non-tariff barriers can have a significant impact on international trade, but they are difficult to compare across states. A second indicator of the degree of openness is trade proportions. This means the ratio of trade to national income for the different states. When the proportion of trade rises then a period of increasing openness can be discovered. The third indicator would be the concentration of trade within regions which are composed of states which are at different levels of development. When this happens this is primarily caused by political choices. Large states will try to protect themselves in the international realm by trying to create regional blocs. In periods of increasing openness the leading industrial states will increase their trade among each other. Decreasing openness often leads these larger states to increase their trade within the regional blocs which are shared with the less developed states. It can thus be said that when tariffs are falling, trade proportions are rising, and regional trading patterns are becoming less extreme the international trading system is becoming more open
(Krasner, 1976, pp. 323-324).
2.2.2 Gilpin’s State-Centric Realism
Krasner’s theory is primarily focused on economics, but realism’s primary concern is security. To link the area of economics with the area of security it is very useful to look at Gilpin’s work. Gilpin strongly relates international trade with the security of states. He says “Concern with security means that power -military, economic, and/or psychological- will be vitally important in international affairs; states must be continually attentive to changes in power relations and the consequences for their own national interests of shifts in the international balance of power. Although, as Richard Rosecrance correctly argues, the “trading state” has become a much more prominent feature of international affairs, it is important to recognize that successful development of the international economy since 1945 has been made possible by the security system provided by the alliances between the United States and its allies in Europe and Asia (Gilpin, 2001, p. 19).” According to Gilpin it is not so easy to say whether states will focus on relative or absolute gains. He says that it depends on the situation. It is dependent on the circumstances under which the specific trade-off between
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two states occurs. Even though the growth of the economy is important for states, they might sometimes view it as less important when there are security issues at stake. An example for this is the Cold War, when the United States actively promoted the economic unification of Western Europe. This was purely a political choice by the United States because it
undermined their own economic position. When a state weighs absolute versus relative gains, security is their primary concern. It is highly unlikely for a state to trade military security for economic gains (Gilpin, 2001, pp. 79-80). Gilpin’s opinion about international institutions is quite strange for a realist. He says about international institutions: “Formal international institutions have been created to manage today’s extraordinarily complex international economy. The most important institutions are the Bretton Woods institutions such as the World Bank, the International Monetary Fund, and the World Trade Organization. The world economy would have difficulty functioning without these institutions. Therefore, understanding their functioning has become an extremely important concern of political economists (Gilpin, 2001, p. 83). However, he later explains that international organizations are important in the area of economic affairs as long as they don’t infringe on the security interests of powerful states (Gilpin, 2001, p. 83). Security is then still the most important factor and therefore his statement is still compatible with the realist school.
For realism Gilpin’s state-centric realism is particularly useful because of its state-centrist view on the international trading structure in relationship to security. The European Union is dependent on the United States for its security (Cordesman, 2018; Daalder, 2000). Both the United States and the European Union view China as a potential threat to their security (Cordesman, 2018; European Commission, 2019b, p. 4) and as a systemic rival who
promotes alternative models of governance (European Commission, 2019b, p. 1). According to Gilpin’s theory it would be highly unlikely for the European Union to trade military security for economic gains.
2.3 Theories in International Relations: Liberalism
The second theory, liberalism, agrees that there is no central government in the international realm and that therefore states are the highest political entity. However, according to
liberalism state behavior is shaped in a different way. States have always been embedded in a transnational society and therefore economic, social and cultural interactions between states happen. The demands from specific groups or individuals in the state, being
transmitted by the domestic institutions, are the state preferences. These state preferences make states act in the international realm. If these state preferences didn’t exist states would have no incentive to engage in world politics. It is not imbalances of power but conflicting
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state preferences from hostile nationalist or political ideologies or conflicts over appropriable economic resources, for example, that explains why there is conflict between states
(Moravcsik, 2008, pp. 234-235). In the area of foreign economic policy, liberalism argues that free trade is most likely where “strong competitiveness, extensive intra-industry trade or trade in intermediate goods, large foreign investments, and low asset specificity internalize the net benefits of free trade to powerful actors, reducing the influence of net losers from
liberalization (Moravcsik, 2008, p. 243).” Security affairs are affected by economic
interdependence. The effect, however, varies with market incentives. The collateral damage of a potential war disrupts economic activity. Therefore the more economic activity there is between states the greater the damage will be when war breaks out. When there is private trade and investment within well-established and complex transnational markets and this provides a less costly means of accumulating wealth and this cannot be cost-effectively appropriated, the expansion of economic opportunities will decrease the chance of war. The western countries, for example, therefore encourage trade with China in order to encourage the evolution of social preferences in a more pacific direction (Moravcsik, 2008, pp. 243-244).
2.3.1 Ricardo’s Theory of Comparative Advantage
In order to understand why liberalism is so optimistic of states reaching compromises in the area of trade it is of utmost importance to understand Ricardo’s work. One of the most well-known theories in international trade is Ricardo’s theory of comparative advantage. Ricardo uses England and Portugal as an example to explain his theory. He uses cloth and wine as the tradable products in his example. Ricardo assumed that the productivity of labor between industries and across countries varies. Adam Smith, in explaining his theory, assumed that England might be more productive in producing one good, while Portugal might be more productive in producing the other good. Ricardo, however, assumed that Portugal is more productive in producing both goods. Ricardo was then able to understand that if Portugal started to specialize in producing one of the goods, and England would then produce the other good, the world output of both goods would rise if appropriate terms of trade would be implemented. In this way England could still profit from free trade, even though it would be technologically inferior (Suranovic, 2010, pp. 68-69).
As it turned out, specialization in any good would not suffice to guarantee the improvement in world output. Only one of the goods would work. Ricardo showed that the specialization good in each country should be that good in which the country had a comparative advantage in production. To identify a country’s good in which it has a comparative advantage, a comparison of production costs across countries is required. However, one does not
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compare the monetary costs of production or even the resource costs (labor needed per unit of output) of production. Instead, one must compare the opportunity costs of producing goods across countries (Suranovic, 2010, p. 69).” The opportunity costs for wine production can be defined as the amount of cloth that a country has to give up in order to produce an extra unit of wine. England would then have the comparative advantage in, for example, wine production relative to Portugal if it has to give up less cloth to produce an extra unit of wine than the amount of cloth that Portugal has to give up in order to produce an extra unit of wine (Suranovic, 2010, p. 69).
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Theoretical Framework
3.1 Theoretical Difficulties
While there is a lot of literature on both realism and liberalism, there is but a limited amount of recent literature using these theories on the area of international trade. It is therefore necessary to rely on older theoretical literature to create a solid theoretical foundation in order to be able to explain the recent trade struggles between the United States and the European Union. Also, trade wars have received little theoretical attention by scholars because they often view them as byproducts of larger political or military conflicts (Conybeare, 1985, p. 147). However, this lack of new literature will not create huge
difficulties because trade wars are not a new phenomenon. Trade wars have already existed for hundreds of years. Conybeare (1985), for example, even analyzed the Anglo-Hanse Trade War which started around 1300 and lasted till around 1700. Trade wars are actually quite an old phenomenon which recently proved to still being an issue in the international realm. In the 21st century there is a lot of economic interdependence between states. It is therefore counter-intuitive to think trade wars are able to happen, but still they do happen. This research might add to the literature of trade wars by applying different theoretical lenses to one of the newest trade disputes.
3.2
Theoretical Framework
Realism and liberalism are the main big picture behind the theoretical framework. However, since these theories are too big and encompass much more topics than just international trade, it is necessary to use “middle-range theories” which are focused on the area of international trade and link it to security. Little has been written about how a trade war between the United States and the European Union could unfold and how the European Union would react to American protectionism in trade policy. This is an interesting case because the economies of the European Union and United States are roughly equal in size (International Monetary Fund, n.d.). Also, the European Union and United States traditionally have been close allies so the recent tension is quite an uncommon situation. This research could help to understand, by using “middle-range theories” which fit into the two large theories, realism and liberalism, how states behave in the international realm of trade. This could therefore be a useful addition to the already existing literature on realism and liberalism and the literature on trade wars. The research will be focused on understanding the
European reaction to Trump’s protectionist policies. First hypotheses will be created from the existing theories. It will then be possible to compare the hypotheses with the findings of the
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empirical research and to come to a conclusion on how the European Union reacts to Trump’s protectionist trade policy.
3.3 Realism
The basic assumption of realism is that the international realm is a realm of anarchy. There is no central authority and therefore sovereign states are the highest authority. Also people are mainly competitive and selfish. Egoism is the defining characteristic of human nature. When these two assumptions are combined the outcome is power politics. States will primarily care about maintaining and expanding power compared to their opponents. According to realists states are primarily concerned about improving, or at least maintaining, their position relative to other states (Donnelly, 2008, p. 150; Wohlforth, 2008, p. 133). This is also known as making “relative gains”. This discourages cooperation because states will only want to cooperate whenever they make more gains than the state they are dealing with. Because every state is focused on making relative gains it will be very hard to come to an agreement.
However, this does not mean that a state treats all other states in the same way. Gowa (1989), for example, argued that since trade produces security externalities, states will trade disproportionately with their allies. Cooperation among states usually suffers from constrains because of competition for relative gains. Allies will not compete as hard as potential
adversaries to improve their relative positions because there are less security concerns among allies (Gowa, 1989). She says “The security externalities of agreements to open borders to trade, I argue, imply that these agreements are more likely to occur within than between military alliances (Gowa, 1989, p. 1253).” Krasner & Webb also make this realist assumption when talking about hegemonic stability theory: “The security version of the hegemonic stability theory, in contrast, does not assume that states have a common interest in international economic liberalization and stability. Even though an open system may raise the absolute level of welfare of all participants, some states will gain relative to others. If the pattern of relative gains threatens the security of powerful states, international economic liberalization will be restricted even though those states could have increased their absolute welfare by participating in a more open system (Krasner & Webb, 1989, p. 184).”
3.3.1 Balance-of-power Theory
Realism is a very diverse school with different theoretical subschools. Besides the different theoretical subschools there are also specific theories within realism which are based around fundamental constrains and incentives that shape the behavior of states and therefore shape the outcomes in international politics. The most well-known example of this is the
balance-of-14
power theory. According to this theory states will guard against the possibility that one state becomes too powerful and will eliminate them. A state will build up its own capabilities when this is the case. This is called internal balancing. A state can also try external balancing. This is possible when a state builds alliances with other states to counter the state that becomes too powerful. Balancing can happen before any state has gained a power edge because states are always looking to the future and will anticipate possible problems (Wohlforth, 2008, p. 141).
Balance-of-power theory can be used by states to conduct economic policy as well. While this theory is often used in a military way, it is actually very useful to use it for economic purposes (Brawley, 2004, p. 76). It is, however, difficult to construct links between the strategic choices in the balance-of-power theory and specific economic policies enacted by states. Economic interaction between states is, according to liberals, mutually beneficial. Most economists are therefore interested in measuring how much a state gets richer or poorer and in its ability to consume goods and services in absolute terms, rather than comparing this to another state. Also, when economic gains are made through international cooperation the other states who cooperate will make economic gains as well. According to the realist argument this should be avoided when possible and especially when other states make greater relative gains from this cooperation. Realists would then say that states should focus on internal economic development instead of making economic gains through
international trade. However, according to balance-of-power theory the possibility of
international cooperation is not to be excluded. While every state poses a potential threat to another state, some states pose a bigger threat than others. When this happens it would be perfectly rational for states to cooperate with other states in order to counter this bigger threat. States can thus engage in trade with their probable allies and limit trade with their potential enemies (Brawley, 2004, pp. 78-79). The primary aim of every state is their own survival. However, states also have secondary security aims. The most important secondary security aim of every state is the avoidance of hegemony. There is no state that wants another state to become so powerful that it is able to dominate all other states (Levy, 2004, p. 32).
15 Figure 3.
Defense spending in billions of U.S. Dollars in 2018
Note: Reprinted from U.S. Defense Spending Compared To Other Countries, by the Peter G. Peterson Foundation from https://www.pgpf.org/chart-archive/0053_defense-comparison
The United States has by far the largest defense spending in the world. China has the
second largest defense budget and it would therefore make sense for the European Union to ally with China in order to counter the power of the United States. Also, the United States has economically attacked China as well by imposing high tariffs on Chinese goods. China
retaliated by imposing tariffs on US goods (Swanson, 2018). Although it is a highly debated topic this thesis will take the stance that the United States is the current hegemon. After World War II the defeated states had the choice to either become the subject of imperial control or to participate in the new hegemonic order that reflected US priorities. However, the United States preferred the creation of a liberal hegemony to empire. Germany and Japan became followers of this new order and were remade in the US image. After the Cold War the United States extended the invitation for joining the new liberal hegemonic order to Russia and China as well. Russia rejected the offer while China embraced it. The US-China
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bargain became a victim of its own success when China became powerful in quite a short time. China is now no longer willing to be a follower of this US-led order. It was just recently, in 2017, that US policymakers concluded that the liberal experiment failed and that China was unlikely to stay part of it. However, China has not presented an alternative yet and the liberal hegemonic order is still in place. The question is whether the United States is willing to defend this order. The Trump administration is the first to question the desirability and
necessity of US hegemony, but countries like Germany and Japan are defending the US-led order as their own. This shows the success of the US hegemonic order (Mastanduno, 2019, pp. 24-26). This is why this thesis will follow the assumption that the United States currently is still the hegemon, although it is far from certain that it will stay this way in the future. In the current international order, however, it would therefore make sense, according to balance-of-power theory, for the European Union to balance against the United States together with China, since they could form a possible alliance to counter the current hegemonic power of the United States.
3.3.2 Balance-of-threat Theory
Another theory in realism, which actually builds on the balance-of-power theory is the
balance-of-threat theory. According to this theory a state doesn’t balance against power, but against threats (Wohlforth, 2018, p. 141). The important distinction to make is thus why some states perceive a hegemonic power as benevolent while others see it as threatening. While balance-of-power theory claims that states balance against power and would therefore always try to balance against a hegemon, Walt would claim that states would only balance against a state that poses the greatest threat to its security. The state that poses the greatest threat against another state’s security does not always have to be the hegemon. Threat is a combination of aggregate power, which is determined by population, but also by economic, military and technological capabilities. Also geographical proximity to others, the possession of offensive military capabilities, and the degree of the display of aggressive intentions plays a role in how a state’s threat is perceived (Layne, 2004, pp. 113-114). According to this theory the United States began external and internal balancing after the Second World War, even though the Soviet Union was militarily inferior in most aspects to the United States, because the Soviet Union was in the heart of Europe and its government was perceived as secretive and aggressive (Wohlforth, 2018, p. 142).
In order to understand how the European Union responds to the US tariffs it is important to understand how alliances are formed. Alliances are usually formed as a response to threats. Two options are possible for a state when responding to a threat. A state can decide to balance. This means that a state will seek allies to oppose the source of danger. A state can
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also decide to bandwagon. This means that a state will ally with the state that poses the threat. When balancing is more common than bandwagoning it is wise for powerful states to not implement threatening policies in order to prevent countervailing coalitions from forming. However, when bandwagoning is more common than balancing, it might be wise for powerful states to implement aggressive policies in order for other states to join the alliance of the status quo. (Walt, 1985, p. 4). States risk their own security if they are not able to join an alliance to limit the power of a potential hegemon before it becomes too strong. When a state decides to ally with the potential hegemon it has no choice but to trust in the continued benevolence of that state. The safer choice is to form an alliance with those who are not able to dominate their allies in order to avoid being dominated by the powerful states who are able to dominate other states. Also, when a state joins the more vulnerable side it is able to increase its influence, because this alliance will be in greater need for assistance. Some scholars, however, disagree and say that bandwagoning is actually more common. They argue that states are attracted to strength and therefore, if a state shows strength, other states are likely to join its alliance. Bandwagoning can be applied when a state wants to pursue appeasement. The state that applies bandwagoning might want to avoid an attack on itself by aligning with the threatening state. A state can also apply bandwagoning in order to share the spoils of victory when conflict breaks out. It is, however, not always the case that states ally against or with the most powerful state. It is more accurate to say that states will ally against or with the most threatening state. If a weaker power is more dangerous for other reasons than its power it is very possible that states balance by allying with strong states (Walt, 1985, pp. 5-9).
The European Union and the United States view China as a potential threat to their security (Cordesman, 2018; European Commission, 2019b, p. 4) and as a systemic rival who
promotes alternative models of governance (European Commission, 2019b, p. 1). The United States is in the same security alliance as most members of the European Union: the North Atlantic Treaty Organization (NATO, n.d.-b). China is thus perceived as a bigger threat to the security of the European Union than the United States and therefore the European Union will balance against China together with the United States.
3.4 Liberalism
Liberalism builds on the idea of harmony and balance amongst competing interests. Liberals believe that states indeed pursue self-interest but that a natural equilibrium in most cases will be the result. Competing interests are not irreconcilable and rather complement each other. A balance of interests then develops among the world which will lead to cooperation and peace (Moravcsik, 2008). Liberals share some assumptions with realists, for example that
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competition is an important component of how states interact and that the international system is decentralized. However, liberals have an entirely different idea about how competition influences the outcome of bargaining between states.
Keohane (1984), for example, wrote a book about how cooperation among advanced
capitalist countries can persist if hegemony declines. According to Keohane, if there wasn’t a superior state who could force states to cooperate, states would still be able to cooperate. Keohane says “Cooperation requires that the actions of separate individuals or
organizations—which are not in pre-existent harmony—be brought into conformity with one another through a process of negotiation, which is often referred to as "policy coordination” (Keohane, 1984, p. 51).” It should therefore be possible to cooperate as long as states negotiate and come to a satisfying compromise.
3.4.1 Neoliberal Institutionalism
Neoliberal institutionalists agree with realists that nation-states are the primary actors in international affairs (Gilpin, 2001, p. 379). However, according to neoliberal institutionalists institutions are not irrelevant. International politics today is both institutional and
intergovernmental. In every functional domain and in every part of the world there are international institutions (Stein, 2008, p. 201). In the area of trade international organizations like the World Trade Organization (WTO) exist.
Realists often criticize the role institutions play. They claim that international institutions only exist in “low politics” like transportation or communication, while they don’t play a role in “high politics” like national security. They also claim that institutions are just a reflection of the balance of power between states. The institutions themselves hold no true power because they can only exist as long as states allow them to. Every institution that exists is therefore just a creation by the powerful to serve their interests (Stein, 2008, p. 206). However, neoliberal institutionalists think this is too simple. According to Stein “the heart of neoliberal institutionalism is a view of international institutions as the self-interested creations of states. States find that autonomous self-interested behavior can be problematic and they prefer to construct international institutions to deal with a host of concerns (Stein, 2008, p. 208).” International institutions are thus not only created to serve the interests of powerful states, but to solve certain problems states encounter when they rationally act out of self-interest. There are two types of problems that can be solved by international organizations. The first are coordination problems. They occur when the different interests of states create multiple equilibria. An international institution can then create a mechanism for equilibrium selection.
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For states an international solution is often preferable to coordination failure. The second type of problems are collaboration problems. They occur when the self-interested choices of states lead to outcomes which are negative for everyone. A good example of this is the Prisoner’s Dilemma where rational self-interested behavior leads to a worse outcome than coordinated behavior. An international institution can solve these problems by allowing states to reach a mutually preferred outcome. These problems often occur in the areas of defense and trade. States are then very motivated to create an international institution in order to prevent bad outcomes (Stein, 2008, p. 208).
According to neoliberal institutionalism institutions matter and make a difference in how states behave. Scholars say that states mostly comply with the agreements they make. However, it is not easy to be absolutely sure that states always comply with the rules of international organizations or to understand why some international organizations are more successful regarding compliance than others. Nonetheless, the fact that states create and use institutions to arrive at the desired outcomes remains significant (Stein, 2008, p. 212). The World Trade Organization (WTO) is one of the most important international
organizations in the area of international trade. According to research all members have experienced benefits in this area because of this institution. The WTO created both rights and obligations for its members and transformed the postwar trade system (Goldstein, Rivers & Tomz, 2007). Neoliberal institutionalism is a useful theory which can be used to explain the European reaction to US tariffs. This theory is especially interesting because of the focus on the role of institutions. In the case of the US-EU trade relations the World Trade Organization (WTO) might play a vital role in preventing a full-scale trade war. Neoliberal institutionalism combines the notion of absolute gains with the importance of international organizations and it is therefore suitable to distill a hypothesis from this theory.
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Hypotheses
When taking the theoretical framework into consideration it is possible to create three hypotheses. This research is focused on the case of the European reaction to American tariffs. Theories related to realism and liberalism are used to see how the European strategy towards Trump’s policies takes shape. Balance-of-power and balance-of-threat theory are theories which both fit into the realist tradition but have different expectations. Neoliberal institutionalism fits into the liberal tradition and focuses on how the European Union uses international institutions in order to react to Trump’s protectionist trade policies. The three hypotheses make a prediction using these theories. The goal of the research is to make clear which hypotheses are the most suitable in explaining the response of the European Union. This can then lead to a clear conclusion which balancing theory is more accurate when predicting the reaction of the European Union to Trump’s protectionist policies and whether a more liberal approach might be a useful addition to explain the role of international
institutions in the reaction of the European Union.
For the first hypothesis balance-of-power theory will be the main fundament. Balance-of-power theory allows for concrete expectations on how the European Union will react to the protectionist policies of the Trump administration. The first realist hypothesis, in which balance-of-power theory belongs, would then be:
a) The European Union will, together with China, balance against the United States because the United States is the hegemon and because the United States has economically attacked both the European Union and China.
The next, but different, realist hypothesis will be the expectation of the reaction of the European Union according to balance-of-threat theory:
b) The European Union will not balance against the United States because the European Union is dependent on the United States for its security.
The third hypothesis will follow from the neoliberal institutionalist perspective:
c) The World Trade Organization will be used by the European Union to solve the trade conflicts with the United States.
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Methodological Framework
This study will conduct a single case study on the reaction of the European Union. “Case study research is concerned with the complexity and particular nature of the case in question (Bryman, 2019, p. 60)”. A case study should not be necessarily generalizable because it is impossible to generalize from one single case (Bryman, 2019, p. 60). However, this doesn’t pose a big problem since this research is not meant to be generalizable. A single case study is interesting because it appreciates the uniqueness of the case. This doesn’t mean that it has no value outside of the case. Case studies can be used for testing theories by creating hypotheses based on these theories. These hypotheses can then either be confirmed or rejected when comparing them to the empirical research (Flyvbjerg, 2006, p. 227). According to George and Bennett (2004) case studies are useful because of “their potential for
achieving high conceptual validity; their strong procedures for fostering new hypotheses; their value as a useful means to closely examine the hypothesized role of causal
mechanisms in the context of individual cases; and their capacity for addressing causal complexity (George and Bennett, 2004, p. 19)”
The value of this research is therefore two-fold. On the one hand it tests theories and is therefore academically useful. On the other hand it closely examines the reaction of the European Union to Trump’s protectionist policies. This will provide a deep understanding of this particular case. However, this research has its limits. The relations of the European Union with the United States and with China will be examined but this says nothing about potential European balancing with other powerful states like, for example, Russia. This is not a problem either because this is outside the scope of this research.
This thesis is about the reaction of the European Union to the protectionist measures of President Trump. In order to find an answer as to what strategy the European Union develops it is important to look at both the economic and the security relations of the European Union and how the EU balances in those two areas, since the European Union has to take its security interests into account when conducting trade policy. So first the economic part of the European Union’s relations with both the United States and China will be examined and then the security part. Although these two sections are separated it sometimes is impossible to talk about the one without talking about the other. Therefore the sections sometimes cross over when it helps to bring more clarity. Since the hypotheses link security issues with trade policy it is important to understand that the two areas are not isolated but can influence each other.
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Economic Balancing of the European Union
6.1 A Short History of EU-US Trade Relations
In order to understand whether the EU-US trade relations have actually changed it is important to make a comparison between the current trade relations under the Trump administration and the trade relations between the EU and US under the Obama
administration. Before Obama was president, George W. Bush was president of the United States. The relationship between the United States and the European Union during the Bush administration had grown colder because of certain policy choices the Bush administration had implemented. This was bad for the US’s reputation and its transatlantic ties. Obama promised to renew those ties in order to be able to cope with an increasing interdependent world and with complicated issues like climate change. European countries were very enthusiastic about Obama’s promises. However, this success of Obama in the European Union can be viewed in two different ways. When looking at style one can easily conclude that Obama has been very successful in strengthening the relationships with the European countries. European leaders were completely at ease with Obama in the White House and the European public was strongly in favor of President Obama. When looking at substance it is more difficult to reach a strong conclusion. Many of the actual policies that were
implemented during the Bush administration didn’t disappear. But, it is also too easy to blame President Bush for the transatlantic drift. The notion of the ‘good old days’ that Bush destroyed and Obama tried to fix is oversimplified. The increasingly diverging worldview of the European Union and the United States is a problem that has been around for a much longer time (Nielsen, 2014, pp. 83-84).
In the area of trade, however, Obama tried to strengthen the relationship with the European Union. He opened negotiations with the EU on establishing a comprehensive free trade agreement. If this deal were to be materialized there would be huge economic benefits to both the US and the EU. Direct GDP gains would be 0.3% for the United States and even 0.7% for the European Union (Nielsen, 2014, pp. 92-93). However, even during the Obama administration there were conflicts between the European Union and the United States. For example, the European Union unilaterally decided to impose fees on airplanes’ CO2
emissions. The United States then demanded exemptions for US airlines. The US even announced that they were not afraid to implement retaliatory measures if the issue wouldn’t be solved. On November 13, 2012, the EU Commissioner for Climate Change, Connie Hedegaard, announced that the European plan would be halted for one year in order to allow the International Civil Aviation Organization to develop a global alternative. However, on the
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exact same day the US Congress passed legislation which demanded non-compliance to the EU plan by US airlines. Obama signed this into law on November 27, 2012 (Nielsen, 2014, p. 95). It is thus clear that conflicts between the United States and European Union are not an entirely new phenomenon.
On the 20th of January 2017 Donald Trump took office as the 45th president of the United
States of America. His campaign slogan was “Make America Great Again.” One of the most important promises during his campaign was that he planned to bring jobs back to the United States. He made some radical trade policy decisions in order to try to deliver on his
promises. He renegotiated the North American Free Trade Agreement (NAFTA), withdrew from the Trans-Pacific Partnership (TPP), implemented tariffs on Chinese goods and even threatened to leave the World Trade Organization (WTO) if they resisted his plans. The number of domestic jobs did actually increase and therefore a lot of Americans agreed with his decisions. However, there is one major assumption in Trump’s reasoning that is flawed and that is that regardless of how the United States treats its trading partners, there will be no repercussions (McGwire, 2017, p. 69).
When comparing the trade data during the Obama administration with the trade data during the Trump administration an interesting conclusion can be drawn. The trade data during the Obama administration shows that the EU in 2010, at the beginning of Obama’s presidency, had a total of €243.3 billion in exports in goods to the United States while having a total of €174.9 billion in imports in goods from the United States. In 2017, when Trump took office, the EU had a total of €376.2 billion in exports in goods to the United States while having a total of €256.6 in imports in goods from the United States. At the end of 2018, after roughly 2 years of President Trump in power, the EU had a total of €406.4 billion in exports in goods to the United States while having a total of €267.3 billion in imports in goods from the United States (Eurostat, 2019b). This shows that both the exports and the imports of the European Union in regards to the United States are growing. It also shows, however, that the trade surplus of the European Union is still rising as well. In 2008 the trade surplus was €65.1 billion and in 2018 the trade surplus was even €139.1 billion. So when looking at the trade in goods it is clear that, contrary to what people would think considering how much President Trump tries to change it, the trade surplus of the European Union has become greater under the Trump administration.
24 Figure 4.
Imports, exports and balance for trade in goods between the EU-28 and the United States, 2008-2018
Note: Reprinted from USA-EU - international trade in goods statistics, by Eurostat
6.2 The Recent Trade Dispute between the United States and the
European Union
It is obvious that even though both imports and exports to the United States are rising, the exports of the European Union to the United States are currently rising faster than the
imports. This increases the trade deficit of the United States and gives President Trump extra incentives to try to balance trade between the US and the EU. The Trump administration is still deciding whether to hit the European Union with new tariffs. The United States and European Union are currently holding talks on lowering duties on industrial goods and avoiding potential escalation. The European Commission threatened the United States with hitting 20 billion euros of U.S. goods with duties if President Trump would decide to follow up on his threat to impose tariffs on the European automobile industry (Bravo, 2019). Jean-Claude Juncker, head of the European Commission, stated that Trump’s fixation on the trade deficit in goods ignores the trade surplus in services. According to Juncker, when all of the trade in goods and services and the profits made by American companies are added up, the benefit was on the side of the United States (Stearns, 2018).
25 Figure 5.
Total balance of trade between the EU-28 and the United States, 2017
Note: Reprinted from EU to Trump: Look at Services When Griping About Trade Deficit, by J. Stearns
When looking at the data it shows that the United States actually has a trade surplus of 12 billion euros in total. This also shows why the global order is so shocked by the fact that the United States imposed tariffs on steel and aluminum against military allies. According to the European Union these tariffs are pure protectionism and they therefore also filed a formal complaint at the World Trade Organization (WTO). The EU also warned that if President Trump would decide to impose new tariffs, this time on the European automotive industry, they will not hesitate to impose new retaliatory tariffs. The European automotive exports to the United States are about 10 times greater than the entire European steel and aluminum exports combined. If the European Union would decide to impose retaliatory tariffs on American goods in case President Trump decides to impose the tariffs, this could potentially lead to heavy consequences for different American industries (Stearns, 2018).
The Trump administration has created problems for the WTO as well. The United States is blocking appointments to the Appellate Body. By December 2019 it is therefore possible that the entire Appellate Body will be undermined because then there will be less than 3
Appellate Body members left. 3 members is the minimum number of members that is required for the Appellate Body to hear an appeal. When the Appellate Body doesn’t
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appealing to it. This endangers the entire WTO dispute settlement system. While the United States first blocked the appointments due to the transition in the US political leadership after the US presidential elections, the problem still has not been solved. The United States now voices complaints related to the workings of the Appellate Body (European Commission, 2018b; Pohl, 2019). The European Union is very worried about how the United States operates within the WTO (Malmström, 2018).
6.3 The Future of EU-US Trade Relations
The Trump administration has tried to bring more reciprocity into the trading system. They adopted a tough approach in order to achieve this. The United States has withdrawn from the Trans-Pacific Partnership (TPP) and has threatened to terminate the North American Free Trade Agreement (NAFTA) if Canada and Mexico weren’t willing to renegotiate the
agreement. The United States rejected pleas by its allies, including the European Union, for better treatment and even took advantage of perceived weaknesses of its allies. This had an impact on the global economy. There are a number of ways how this trade dispute between the United States and the European Union can impact the bilateral trading relationship (Chase, Mukai & Sparding, 2018, p. 38). The European Union has reacted to the tariffs on steel and aluminum by “filing a dispute settlement case in the WTO, applying “rebalancing” tariffs under Article XVIII of the WTO’s General Agreement on Tariffs and Trade, and
readying safeguard actions against a possible surge in steel and aluminum imports that have been deflected from the U.S. market (Chase, Mukai & Sparding, 2018, p. 38).” Just before the President of the European Commission, Jean-Claude Juncker, visited Washington D.C. on July 25, 2018, in order to discuss with President Trump the de-escalation of the trade disputes, President Trump decided to attack the European Union again. The EU had
imposed a fine of €4 billion on Google because of violations of EU anti-trust law and because Google is a US company President Trump reacted furiously to this decision by the EU. This also impacted the talks on July 25, 2018, which eventually resulted in some kind of ceasefire, but with the steel and aluminum tariffs still in place (Chase, Mukai & Sparding, 2018, p. 39).
Chase, Mukai & Sparding (2018) conducted a study for the European Parliament on the consequences of US trade policy on EU-US trade relations and the global trading system. They have created three possible future scenarios for the bilateral trade relationship between the European Union and the United States. The first scenario is the most constructive
outcome. In this case the United States would unilaterally terminate the tariffs they imposed on steel and aluminum and all WTO cases which followed on these tariffs will be withdrawn. The Executive Working Group, initiated when Juncker visited Washington D.C., would be
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used in order to enhance trade relations and this will then eventually lead to the full
elimination of tariffs (Chase, Mukai & Sparding, 2018, p. 39). The Executive Working Group has been set up by the European Union and the United States to take the joint agenda of pursuing a better trade relationship forwards (European Commission, 2019a, pp. 1-2). Also there would be more progress on regulatory and standards issues. However, this scenario has little chance of happening because the Trump administration would have to concede almost all of their negotiating objectives. The Trump administration even announced that it will not loosen its restraints on trade in steel and aluminum. So even if the tariffs would be abolished the United States would implement quotas in order to restrict the import of steel and aluminum (Chase, Mukai & Sparding, 2018, p. 39).
The second scenario would be a partial return to the transatlantic status before the trade dispute. In this case the steel and aluminum dispute would be solved by the European Union which would agree to impose voluntary restraints on exports to the United States. The WTO case would then be terminated. The European Union has indicated that it would be willing to implement these voluntary restraints as long as the allowed export volumes would be closely based on the trade levels of 2017. In the ideal situation the United States would then decide not to implement the tariffs on the European automobile industry. The Executive Working Group could in this scenario also play a role in strengthening the trade relationship between the US and the EU. The US and the EU would then also be able to form an alliance in the WTO against objectionable Chinese trading practices. This would be a more likely scenario than the previous one because the Trump administration would be able to claim a victory. However, trade between the US and the EU would still suffer because of reduced potential trade in steel and aluminum which would be caused by the voluntary restraints. Also, the trade war of the US with China would still continue and this also has negative effects on trade between the US and the EU. An argument against the likelihood of this scenario is the fact that President Trump has stated his intents to raise tariffs on the European automobile industry. Trump framed this as a national security threat. Although the link with national security is highly debatable the likelihood of a positive finding in the United States that the imports of autos and auto parts are a threat to national security is very high. President Trump would then be likely to agree and to impose new and higher tariffs (Chase, Mukai &
Sparding, 2018, pp. 39-40).
The last scenario is the worst, but the most likely one. This would mean that the Trump administration feels that it needs to follow through on the threats of President Trump in the short term. The tariffs on steel and aluminum and the retaliatory tariffs by the EU will all stay in place, the tariffs on cars and auto parts will be formally announced and the other trade
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dispute, between the United States and China, will continue to escalate. If the European Union wants to get its own industry exempted it will have to do concessions to the United States. This would probably include the acceptance of a quota on auto exports to the US, the withdrawal of the WTO case and some form of reduction in EU tariffs and standards barriers which are applied on auto and auto part exports from the United States to the European Union. The Trump administration has stated that this long-standing complaint on these European standards is a high near-term priority. It is therefore not impossible that the United States would agree with the concessions of the European Union. While this scenario is thus quite likely, it does have serious consequences for trade between the US and the EU. It also has huge consequences for the global economy because the trade disputes of the United States with the rest of the world are likely to escalate. It is also not unthinkable that the EU is not exempted. If the goal of the Trump administration is not to gain leverage in order to solve some of their concerns, but to seriously raise significant barriers to trade in autos and auto parts so that the auto manufacturing industry in the United States can thrive, then it would actually be very unlikely that this scenario will happen. The European Union should then consider if it wants to pursue another WTO case against the use of national security by the US and whether it want to impose new retaliatory tariffs. If the EU decides it wants to impose new retaliatory tariffs this would have deep effects on the entire global economy (Chase, Mukai & Sparding, 2018, pp. 40-41).
According to Chase, Mukai & Sparding (2018) the European Union can, and perhaps should, respond to US tariffs on the imports of autos and auto parts by filing a case at the WTO. The EU should also take rebalancing measures the same way they did when the US imposed tariffs on steel and aluminum. Because of the negative effects these measures would have on the EU economy it could choose to take retaliatory action on a smaller volume of trade than that what is affected by the measures of the United States. The retaliatory actions should, however, be large enough so that it is meaningful. It is also important for the EU to understand the origin of the Trump administration’s trade policy. There is a feeling among people in the American business establishment that the generosity of the United States after the Second World War has led the rest of the world, and especially China, to take advantage of them. The Trump administration is trying to correct this perceived imbalance. The
European Union could accept this need for rebalancing as the basis of future talks. This would turn the debate away from the threats and the responses. There are three areas which the European Union and the United States can use to achieve more constructive
engagement. These three areas are bilateral trade relations, the WTO and China (Chase, Mukai & Sparding, 2018, p. 42).
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6.4 A Short History of EU-China Trade Relations
Smith (2016) proposes that there are three key mechanisms at the core of the European Union’s strategic partnerships and its strategic diplomacy. The first mechanism is framing. This is focused on the ways how the EU creates the key requirements for strategic
partnerships and how they link this to the EU’s self-conception as an important power in the international arena. The second mechanism is negotiation. These are the ways how the EU tries to create a negotiated order in its relations with its major partners and by doing so reinforces both the rhetorical and the discursive commitments that emerged from the framing process. It can therefore be seen as the construction of a framework which is based on institutions and norms which enable the EU to promote or preserve its perceived interests. The last mechanism is management. This is simply the generalization of the institutionalized processes of both communication and problem-solving within the context that was created during the framing and negotiation. These three mechanisms are balanced in a complex way and are necessary to look at in order to understand how the EU acts in any strategic
relationship (Smith, 2016, pp. 78-79).
In this case it is particularly useful to look at the first two mechanisms in relation to the EU’s strategic relationship with China because they are based on how the European Union has shaped its relationship with China and for what reason. For framing it is clear that the European Union has tried to frame its relationship with China in a way that shows the changing priorities and preoccupations of the EU but that also shows the changing global world order and the role China should play in this new world, for example by opening up its economy and by supporting a transition to an open society. China has reacted to this by sometimes challenging the EU’s view on how China should behave itself in this new world order but sometimes also by underlining the way the EU frames its relationship with China. For China the most important part was to be acknowledged and to be treated as a major power. For the European Union the relationship was primarily focused on economic priorities and on the integration of China into the global economy. When China became a member of the World Trade Organization the main priority for the European Union was that China complied by the rules (Smith, 2016, pp. 80-84).
When looking at the mechanism of negotiation some other interesting developments can be found. In 2006 the EU proposed negotiations for a Partnership and Cooperation Agreement (PCA) with China, because the current relationship is still based on the EU-China Trade and Cooperation Agreement from 1985. The European Union desired to give the relationship with China a more legal basis. Both China and the EU saw the value of such an agreement but they also both tried to link different agenda items to each other in order to force the other to
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make concessions. The EU wanted to make the agreement as comprehensive as possible, dealing with all issues including human rights. However, China wanted to focus primarily on trade and cooperation in the traditional sense. They separated the trade issues from the political ones and started the talks later that year. However, due to a lot of political disagreement the agreement has still not been concluded and the negotiations are still ongoing. While the expectations were that the negotiations would take around two or three years it is now already taking more than a decade. In the early stages a lot of progress had been made on the political issues but the European Parliament strongly made its voice heard. They wanted to link the trade agreements with matters concerning for example human rights or environmental issues. There were strong disagreements on the matters of human rights in China and the situation of Taiwan. While the negotiations on the PCA are currently stuck, new initiatives are launched. In 2013 a EU-China Strategic Agenda for Cooperation was agreed upon where both partners agreed to commit themselves to a plan of action, for the period up to 2020, based on the three pillars of the comprehensive strategic partnership. These three pillars are political, economic and civil society. This agreement is a strategic action plan for different areas in which coordination is to be pursued. It is, however, not legally binding. So while some progress has been made in drafting a legally binding agreement between the EU and China, this has failed until now. Some more limited agreements, most notably the EU-China Strategic Agenda for Cooperation, have been agreed upon but these are not legally binding (Smith, 2016, pp. 84-88).
In 2010, at the beginning of Obama’s presidency, the exports from the European Union to China were €113.5 billion in goods while the imports from China to the European Union were €283.9 billion in goods. In 2017, when President Trump took office, the exports from the European Union to China were €197.6 billion in goods while the imports from China to the European Union were €375.4 billion in goods. In 2018 the exports from the European Union to China were €209.9 billion in goods while the imports from China to the European Union were €394.7 billion in goods (Eurostat, 2019a). It is clear that trade between the European Union and China has intensified over the last years. However, when looking at the graph in Figure 6 it is clear that this doesn’t necessarily has to do with the election of Donald Trump, since trade between the European Union and China has risen steadily over the last 10 years.
