Lamy: ‘Trumponomics’ won’t contaminate Europe

Pascal Lamy, former EU trade chief and WTO head. [Evan Lamos/ EURACTIV]

Former World Trade Organisation chief and EU Trade Commissioner Pascal Lamy has denounced Donald Trump’s protectionist trade policy for being outdated, telling a EURACTIV event he isn’t concerned that European politicians will follow the new US president’s cue.

“He’s surrounded himself with people whose views on trade date from 50 years ago. They’re all 70 plus and they probably learned what they learned on trade when they were 20,” Lamy said yesterday (25 January) at an event held at euractiv.com’s office in Brussels.

“Trumponomics” will backfire quickly on the US economy and hurt most those American voters who were won over by Trump’s protectionism, Lamy warned. Trade experts have argued that China could retaliate to Trump’s plans with tariffs of their own.

The former EU Commissioner, who is currently President Emeritus of the Jacques Delors Institute, said Trump’s protectionism was popular among voters because the US labour market was hit harder by globalisation than any European country.

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Lamy became head of the World Trade Organisation (WTO) after his term as EU Commissioner ended in 2004. He spoke about the EU’s multiple trade deals involving the US on the same day that Cecilia Malmström, the current EU trade boss, acknowledged that Trump’s presidency would chill the EU’s trade relations with the US.

“Even if the US is our most important partner, and a necessary one, the world is bigger than one country,” Malmström said yesterday during a speech at a Brussels think tank, touting the “long list” of other countries that still want to trade with Europe.

“Those who, in the 21st century, think that we can become great again by rebuilding borders, reimposing trade barriers, restricting people’s freedom to move, are doomed to fail,” Malmström said in a clear reference to Trump.

European Central Bank chief economist Peter Praet also said yesterday that Trump’s approach to international trade suggests an inclination for bilateral deals, which risks a backlash from nations who are left out.

“I think one has to be very careful because history has told us that when you move in one direction, the other countries will move in the other direction, so you have a tit-for-tat risk in world trade,” the ECB executive board member said in Rome.

Europe could join TPP

Trump cemented his campaign promise to rip up free trade agreements on Monday (23 January) when he announced that he was taking the US out of the 12-country Trans-Pacific Partnership. Lamy said the deal was already dead. TPP has been signed but not yet ratified.

“He killed a zombie,” Lamy said. But Trump’s move to axe TPP could be Europe’s golden ticket to join the deal at the last minute, while the other 11 trade partners involved are hanging in limbo.

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Malmström acknowledged that Trump is likely to put negotiations over the EU-US free trade agreement TTIP “in the freezer at least for a while”. TTIP has drawn outrage in several EU countries amid criticism that the deal would lower environmental standards and give multinational firms the power to challenge national laws.

Lamy said the European Commission officials who crafted the deal “have themselves not even understood what they were doing when they started TTIP”.

Trump victory could spell the end of TTIP

A protectionist US president and increased European suspicion of a Trump-led America undermine the prospects of a planned transatlantic free trade agreement between the European Union and the United States, various stakeholders said.

TiSA and China

Another agreement that would liberalise trade in services like finance and telecoms between the EU and 22 countries, including the US, has trudged through slow negotiations and recently caused strife within the European Commission over its potential effects on EU data protection rules.

Lamy’s successor, former EU Trade Commissioner Karel De Gucht, supported China’s bid to join talks on the agreement in 2014.

“TiSA without China doesn’t have a lot of importance,” Lamy said.

“If you have the TiSA members plus China, you have 80% of trade in services on the planet,” he said, arguing the deal would reach a “critical mass” if China is allowed to join.

The United States’ “China containment” in both TPP and TiSA made those agreements weaker, according to Lamy.

“The EU was wrong to accept this US dictat that China should not be part of TiSA,” he said.

Trump has targeted China for much of his protectionist plans and vowed to raise a 45% tax on all Chinese imports. Lamy said that would “harm the US incredibly more than China”.

Brexit vote not protectionist

Despite comparisons between voters who supported Trump in the US and who voted to leave the EU in the UK’s referendum last June, Lamy insisted that the UK is not marked by a Trump-style brand of protectionism.

Campaigners who pushed for Brexit vowed that leaving the bloc would limit migration from other EU countries to the UK. But they claimed that Britain could still remain in the EU single market after it exits. EU politicians insist that won’t be possible.

“As long as the answer to this Brexit vote is ‘Global Britain’, I don’t think she ranks protectionism very high in the reasons why Britain turns inward,” the former trade chief said of UK Prime Minister Theresa May.

May told an audience last week at the World Economic Forum in Davos that Britain is a “great, global trading nation”.

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