GT Voice: EU needs to counter American protectionism with globalization
Published: Nov 28, 2022 11:56 PM Updated: Nov 28, 2022 11:52 PM
Illustration: Liu Rui/GT

Illustration: Liu Rui/GT

When it comes to dealing with the US' protectionist measures against European interests, Europe needs to counter back with a more open approach for globalization, instead of just falling into a protectionism trade war that fails to address its current economic woes.

French Finance Minister Bruno Le Maire said France may try to negotiate some exemptions from the duties and limits imposed by the US anti-inflation act, but Europe must act to protect the bloc's economic interests, Reuters reported on Sunday.

Le Maire's remarks came just before French President Emmanuel Macron's state visit to the US, scheduled for December 1. Given the growing economic contradictions between the US and the EU, the Macron visit is anticipated to serve as a window as to how the EU will react toward its rift with the US over the latter's non-market subsidies.

The US passed in August the Inflation Reduction Act (IRA), which will provide generous subsidies for electric cars, batteries and renewable energy products made in the US. This will put EU companies at a huge disadvantage and leave the EU at even bigger risk of mass de-industrialization.

Since the IRA was rolled out, France and Germany are among those that have lashed out at the US protectionist policies, while the European Commission is looking for ways to protect the interests of EU companies, according to media reports.

To a certain extent, it is commendable that the EU has tried to resist US violations of the principles of free and fair trade after having realized that the US could actually sacrifice any of its allies to serve its own interests.

Nevertheless, it should be noted that some voices have claimed that there is no need for Europe to continue to uphold the rules of free trade amid the rising anti-globalization waves. Recent media reports mentioned the possibility of a potential subsidy race between the EU and the US as the EU is reportedly preparing a significant subsidy push to allow EU companies to remain competitive.

If anything, it would be totally misguided if the EU chooses to fight protectionism by giving up free trade. History has proved that no country can solve its economic problems through protectionism. The US cannot address its structural economic problems, such as the manufacturing hollowing-out, huge fiscal deficits and ultra-low savings rates, through protectionist measures. Neither is it possible for the EU to alleviate its recession risk, high inflation and energy crisis through protectionism.

On the contrary, for the EU whose economy is highly dependent on international markets and deeply integrated into the globalized economy, if its own economic vitality and market attractiveness were weakened by its anti-globalization practice, other economies' willingness to deepen economic and trade ties with the bloc would also be affected, which may result in another shock to the EU economy.

Trade is an important engine of global growth, while protection has always been self-defeating. High barriers may protect domestic industries in the short term, but will backfire in the long run. If countries all use protectionist measures to protect their domestic companies, the global economy would be stuck with stagnation. In this sense, the US-led anti-globalization wave is selfish and irresponsible for the global economy.

There is no denying that the Russia-Ukraine conflict has brought severe challenges to Europe, which is trapped in energy squeeze and high inflation. But the more economic difficulties there are, the more independence Europe needs, rather than simply following the US and falling into another strategic trap of protectionism. At a time when more and more economies are realizing the value of a fair and free trading environment, it is high time for the EU to advocate and further promote globalization.

China has been a committed supporter of the multilateral trading system with the WTO at its core, respects market rules, opposes protectionism and is committed to promoting the sound and steady development of the global economy and trade. The EU is an important stabilizing force in a multipolar world, and China is willing to cooperate with the EU to promote free trade and to counter protectionism.